Exhibit
13.0





GS
      Financial Corp.2008 Annual
Report











To our Shareholders:  A
      Message from the President andCEO





The
Broader Economic Crisis Affected our Performance in 2008




As
you know, national economic conditions, which deteriorated significantly in the
second half of 2007, continued their free fall in 2008 with GDP contraction,
rising unemployment and declining home prices.  While our local market
has, to date, been spared a significant downturn in economic conditions for the
most part, we were not completely immune to the recessionary forces adversely
affecting markets throughout much of the nation during 2008.




The
falling prices of real estate and real estate related assets have greatly
impeded the securitization markets resulting in non-functioning markets and
illiquidity of some investment securities. In accordance with mark-to-market
accounting, we took a $1.3 million non-cash impairment charge in 2008 with
respect to two mutual fund investments that were purchased more than five years
ago.




The
nationwide deterioration in the mortgage and housing market had an adverse
impact on the holdings of these two funds, the AMF Ultra Short Mortgage Fund and
the AMF Intermediate Mortgage Fund, which are backed by private-label mortgage
backed securities.  The two funds were downgraded by ratings agencies
during 2008.




Since
the beginning of 2006, we have aggressively reduced our exposure to these
investments as evidenced by a $45.9million,
or 93.1%, reduction of our investment in these funds, from $49.3 million at year
end December 31, 2005 to $3.4 million as of December 31, 2008.  We are
continuing our liquidation of these securities in
2009.  Unfortunately, the mutual fund write-downs overshadowed the
improvements we have made in our core banking operations.




2008
Highlights and GrowthinCore
Banking Operations




In
2008, we focused our strategic initiatives on our company's core business –
residential mortgage lending, business lending and continued development of
better deposit products and services – to help accelerate our growth in these
areas of strength by offering our customers improved and highly competitive
products and convenient services designed with their financial needs in
mind.




The
development of our franchise has laid the foundation for solid long-term
earnings improvement.  We have effectively maintained a high level of
personalized customer service and have grown our business loan relationships
with targeted client segments.  In our efforts to increase our
interest income as well as fee service income, we have continued to maintain our
focus on building our customer base by providing excellent customer service and
increasing the products and services we offer.




Our
strategic initiatives included:





■
            Grow residential mortgage banking loan
      production by continuing to expand our mortgage loan product offerings in
      order to generate more interest income, fees and secondary market
      income.





■
            Grow business banking loans, interest, fees
      and low cost business demand deposits by focusing on our relationship
      approach to banking which emphasizes consultative, needs-based selling
      with an emphasis on our portfolio's safety, soundness and
      profitability.





■
            Grow consumer loans, convenience services,
      fees, and lower cost retail deposits. Home equity (HELOC) and share loans
      are our primary consumer loan
products.





■
              Utilize information technology to improve
      the productivity and efficiency of our mortgage, commercial, consumer
      banking and back office
functions.








2008
Annual Report





Page
1





■
            Attract
      and retain quality personnel with the requisite expertise to support a
      full-service community banking business
model.




■
            Prudently expand our branch
      network.





The
results of these initiatives are as follows:


■
            Total
      assets increased by $35.4 million, or 19.0%, from $186.5 million at
      December 31, 2007 to $221.9 million at December 31,
  2008.


■
            Net
      loans increased by $40.0 million, or 33.8%, in 2008 with the majority of
      the growth in real estate secured loans, both residential and
      non-residential.


■
            Deposits
      increased by $10.6 million, or 8.2%, in 2008 with a significant portion
      ($2.3 million) in non-interest-bearing
accounts.


■
            Interest
      and dividend income increased by $1.2 million or10.5% in 2008.


■
            Net
      interest income increased by $974,000 or 17.1% in
  2008.


■
            Secondary
      marketing income increased $88,000 or 46.6% in
  2008.





Capital
Strength




We
are poised for steady growth because of our strong capital position, the success
of our new west bank branch, competitor disruptions, the addition of more
mortgage originators and an improved range of products and services we offer to
our customers and prospects.




Additionally,
because of our strong capital position, we declined to participate in the FDIC's
Troubled Asset Relief Program (recently referred to as the "bank bailout"
program). Our core and total risk based capital ratios were 11.6% and 19.3%,
respectively, at December 31, 2008. and we were considered a “well-capitalized”
bank at such date.




Strategy
for 2009




It
is important for all shareholders to know that we continue to be a strong and
well capitalized financial institution. Because of this capital strength we
expect to build our business for the long term in a safe and sound manner while
continually taking advantage of lending and depository opportunities in our
market. We also plan to increase the growth of our core customer deposits to
optimize the profitability of our balance sheet growth.




We
realize that this year will be even more challenging than 2008. We believe that
our business strategy is sound and, as a well capitalized community bank, we can
play a positive role in the lives of our individual and small business customers
within our local community. Community banks like Guaranty Savings have been
recognized as the bright spot in the current banking and economic
turmoil.




Our
strategic plan and initiatives are yielding good results as we navigate through
unprecedented economic events. We believe that 2009 will afford us the
flexibility to seize opportunities, grow our client base and further ourprospects
for long term shareholder value.




I
pledge to you that Guaranty Financial Corp. will prevail and emerge stronger
with the continued trust and confidence of our shareholders, customers and our
community.




Thank
you for your continued support and investment in our company.









Stephen
Wessel


President
and Chief Executive Officer








2008
Annual Report


Page
2


Index to Annual
      ReportBusiness
      Description
                  4Shareholder
      Information
                  4Selected
      Consolidated Financial Data
                  5Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  6Management’s
      Report on Internal Control Over Financial Reporting
                  26Report
      of Independent Registered Public Accounting Firm
                  27Consolidated
      Balance Sheets
                  28Consolidated
      Statements of (Loss) Income
                  30Consolidated
      Statements of Comprehensive (Loss) Income
                  31Consolidated
      Statements of Changes in Stockholders’ Equity
                  32Consolidated
      Statements of Cash Flows
                  33Notes
      to the Consolidated Financial Statements
                  35Board
      of Directors
                  66Executive
      Officers Who Are Not Directors
                  66Banking
      Locations
                  67








2008
Annual Report




Page
3





Business
      Description





GS Financial Corp. (“GS Financial” or the “Company”) provides community
banking services through its wholly-owned subsidiary, Guaranty Savings Bank, a
Federally chartered savings bank, at its five banking locations and a loan
production office in the metropolitan New Orleans area.




The Company, a thrift holding company organized and incorporated under
the laws of the State of Louisiana, is subject to the supervision and regulation
of the Office of Thrift Supervision as well as other federal agencies governing
the banking industry and public companies.





Shareholder
      Information





TRANSFER
AGENT, REGISTRAR, AND DIVIDEND PAYING AGENT FOR COMMON STOCK


Registered
shareholder inquiries related to stock transfers, address changes, lost stock
certificates, dividend payments or account consolidations should be directed
to:




Registrar
and Transfer Company


10
Commerce Drive


Cranford,
New Jersey 07016


(800)
368-5948


www.rtco.com





FORM
10-K AND OTHER FINANCIAL INFORMATION


Shareholders
are advised to review financial information and other disclosures about GS
Financial contained in its Annual Report on Form 10-K.  The Form 10-K
for the year ended December 31, 2008 and other financial reports filed by GS
Financial with the SEC are available on the Company’s web site at
www.gsfinancialcorp.com or the SEC’s web site at www.sec.gov, or may be obtained
without charge by calling Lettie Moll, Corporate Secretary, or Stephen Theriot,
Chief Financial Officer, at (504) 457-6220 or by writing to:




GS
Financial Corp.


Investor
Relations


3798
Veterans Boulevard


Metairie,
Louisiana 70002





COMMON
STOCK


GS
Financial’s common stock is traded on The NASDAQ Global Market under the ticker
symbol GSLA.  At December 31, 2008, the closing price was $12.50 per
share and there were approximately 90 shareholders of record.





MARKET
PRICES AND DIVIDENDS


Set
forth below are the high and low sales prices for GS Financial’s common stock on
the NASDAQ Global Market and dividends paid for the periods
presented.





Year
      2008
                            
                            Stock
      Price
                            
                            
                            DividendsQuarter
      Ended
                            
                            High
                            
                            
                            LowMarch
      31
                            
                            $
                            18.94
                            
                            
                            $
                            14.25
                            
                            
                            $
                            0.10June
      30
                            
                            
                            18.50
                            
                            
                            
                            14.35
                            
                            
                            
                            0.10September
      30
                            
                            
                            16.75
                            
                            
                            
                            12.00
                            
                            
                            
                            0.10December
      31
                            
                            
                            16.72
                            
                            
                            
                            10.75
                            
                            
                            
                            0.10Year
      2007
                            
                            Stock
      Price
                            
                            
                            DividendsQuarter
      Ended
                            
                            High
                            
                            
                            LowMarch
      31
                            
                            $
                            21.38
                            
                            
                            $
                            19.00
                            
                            
                            $
                            0.10June
      30
                            
                            
                            21.49
                            
                            
                            
                            18.26
                            
                            
                            
                            0.10September
      30
                            
                            
                            20.75
                            
                            
                            
                            17.04
                            
                            
                            
                            0.10December
      31
                            
                            
                            19.50
                            
                            
                            
                            17.59
                            
                            
                            
                            0.10






INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
 LaPorte,
Sehrt, Romig and Hand
 A
Professional Accounting Corporation
 110
Veterans Boulevard, Suite 200
 Metairie,
Louisiana 70005





2008
Annual Report




Page
4


GS
      Financial Corp. and SubsidiarySelected
      Consolidated Financial
Data


At
      or For Years Ended December 31,($
      in thousands, except per share data)
                
                2008
                
                
                2007
                
                
                2006
                
                
                2005
                
                
                2004BALANCE
      SHEET DATATotal
      assets
                
                $
                221,870
                
                
                $
                186,487
                
                
                $
                168,380
                
                
                $
                177,614
                
                
                $
                200,066Cash
      and cash equivalents
                
                
                3,205
                
                
                
                9,462
                
                
                
                11,117
                
                
                
                22,555
                
                
                
                7,024Loans
      receivable, net
                
                
                158,523
                
                
                
                118,477
                
                
                
                93,987
                
                
                
                69,657
                
                
                
                92,158Investment
      securities
                
                
                47,617
                
                
                
                47,747
                
                
                
                55,090
                
                
                
                77,344
                
                
                
                94,557Deposit
      accounts
                
                
                140,115
                
                
                
                129,510
                
                
                
                122,754
                
                
                
                118,866
                
                
                
                130,723Borrowings
                
                
                52,002
                
                
                
                26,986
                
                
                
                17,042
                
                
                
                32,106
                
                
                
                39,689Stockholders'
      equity
                
                
                27,558
                
                
                
                28,164
                
                
                
                27,164
                
                
                
                25,407
                
                
                
                28,944INCOME
      STATEMENT DATAInterest
      income
                
                $
                12,426
                
                
                $
                11,248
                
                
                $
                11,000
                
                
                $
                10,466
                
                
                $
                10,989Interest
      expense
                
                
                5,751
                
                
                
                5,547
                
                
                
                4,904
                
                
                
                4,856
                
                
                
                5,436Net
      interest income
                
                
                6,675
                
                
                
                5,701
                
                
                
                6,096
                
                
                
                5,610
                
                
                
                5,553Provision
      (reversal) for loan losses
                
                
                -
                
                
                
                (300
                )
                
                
                (1,981
                )
                
                
                4,793
                
                
                
                343Non-interest
      (loss) income
                
                
                (994
                )
                
                
                424
                
                
                
                51
                
                
                
                (1,294
                )
                
                
                (691
                )Non-interest
      expense
                
                
                5,673
                
                
                
                5,409
                
                
                
                4,926
                
                
                
                4,707
                
                
                
                4,483Net
      income (loss) before taxes
                
                
                8
                
                
                
                1,016
                
                
                
                3,202
                
                
                
                (5,184
                )
                
                
                36Net
      (loss) income
                
                
                (6
                )
                
                
                658
                
                
                
                2,114
                
                
                
                (3,676
                )
                
                
                199KEY
      RATIOSReturn
      on average assets
                
                
                n/m
                
                
                
                0.38
                %
                
                
                1.21
                %
                
                
                (1.96
                )%
                
                
                0.10
                %Return
      on average stockholders' equity
                
                
                (0.02
                )%
                
                
                2.40
                %
                
                
                8.15
                %
                
                
                (13.76
                )%
                
                
                0.70
                %Net
      interest margin
                
                
                3.37
                %
                
                
                3.44
                %
                
                
                3.58
                %
                
                
                3.12
                %
                
                
                2.73
                %Average
      loans to average deposits
                
                
                104.88
                %
                
                
                88.35
                %
                
                
                70.74
                %
                
                
                71.74
                %
                
                
                62.69
                %Interest-earning
      assets toInterest-bearing
      liabilities
                
                
                117.05
                %
                
                
                118.86
                %
                
                
                117.88
                %
                
                
                115.04
                %
                
                
                114.37
                %Efficiency
      ratio
                
                
                99.86
                %
                
                
                88.27
                %
                
                
                80.14
                %
                
                
                109.06
                %
                
                
                92.20
                %Non-interest
      expense to average assets
                
                
                2.73
                %
                
                
                3.12
                %
                
                
                2.82
                %
                
                
                2.51
                %
                
                
                2.12
                %Allowance
      for loan losses to loans
                
                
                1.69
                %
                
                
                2.82
                %
                
                
                3.82
                %
                
                
                7.58
                %
                
                
                0.99
                %Stockholders'
      equity to total assets
                
                
                12.42
                %
                
                
                15.10
                %
                
                
                16.16
                %
                
                
                14.30
                %
                
                
                14.47
                %COMMON
      SHARE DATAEarnings
      (loss) per share:Basic
                
                
                n/m
                
                
                $
                0.53
                
                
                $
                1.74
                
                
                $
                (3.11
                )
                
                $
                0.17Diluted
                
                
                n/m
                
                
                
                0.52
                
                
                
                1.73
                
                
                
                (3.11
                )
                
                
                0.17Dividends
      paid per share
                
                
                0.40
                
                
                
                0.40
                
                
                
                0.40
                
                
                
                0.40
                
                
                
                0.40Dividend
      payout ratio
                
                
                n/m
                
                
                
                76.44
                %
                
                
                22.99
                %
                
                
                n/m
                
                
                
                235.29
                %Book
      value per share
                
                $
                21.56
                
                
                $
                21.90
                
                
                $
                22.00
                
                
                $
                20.99
                
                
                $
                22.47Trading
      data:High
      closing price
                
                $
                18.94
                
                
                $
                21.49
                
                
                $
                21.76
                
                
                $
                19.66
                
                
                $
                19.90Low
      closing price
                
                
                10.75
                
                
                
                17.04
                
                
                
                14.99
                
                
                
                12.86
                
                
                
                17.90End
      of period closing price
                
                
                12.50
                
                
                
                18.94
                
                
                
                19.80
                
                
                
                15.00
                
                
                
                18.00Average
      shares outstanding:Basic
                
                
                1,278,292
                
                
                
                1,243,655
                
                
                
                1,212,173
                
                
                
                1,181,313
                
                
                
                1,156,441Diluted
                
                
                1,278,292
                
                
                
                1,268,995
                
                
                
                1,222,949
                
                
                
                1,181,313
                
                
                
                1,178,013








2008
Annual Report





Page
5





GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations




Presented
below is a discussion of the financial condition of GS Financial Corp. (“GS
Financial” or the “Company”) at December 31, 2008 and 2007 and of the Company’s
results of operations during the years ended December 31, 2008, 2007, and
2006.  Virtually all of the Company’s operations are dependent on the
operations of its subsidiary, Guaranty Savings Bank (“Guaranty” or the “Bank”),
formerly known as Guaranty Savings and Homestead Association.  This
discussion is presented to highlight and supplement information presented
elsewhere in this Annual Report, particularly the consolidated audited financial
statements and related notes.  This discussion should be read in
conjunction with the accompanying tables and our consolidated, audited financial
statements.  Certain financial information in prior years has been
reclassified to conform to the current year’s presentation.





FORWARD-LOOKING
STATEMENTS


In
addition to the historical information, this annual report includes certain
forward-looking statements as that term is defined by the Private Securities
Litigation Reform Act of 1995.  Such statements include, but may not
be limited to comments regarding (a) the potential for earnings volatility from,
among other factors, changes in the estimated allowance for loan losses over
time, (b) the expected growth rate of the loan portfolio, (c) future changes in
the mix of deposits, (d) the results of net interest income simulations run by
the Company to measure interest rate sensitivity, (e) the performance of
Guaranty’s net interest income and net interest margin assuming certain future
conditions, (f) the future prospects of metropolitan New Orleans, and (g)
changes or trends in certain expense levels.





Forward-looking
statements are based on numerous assumptions, which may be referred to
specifically in connection with a particular statement.  Some of the
more important assumptions include:





·
            expectations
      about the overall economy in the Company’s market
  area,


·
            expectations
      about the ability of the Bank’s borrowers to make payments on outstanding
      loans and the sufficiency of the allowance for loan
  losses,


·
            expectations
      about the current values of collateral securing the Bank’s outstanding
      loans,


·
            expectations
      about the movement of interest rates, including actions that may be taken
      by the Federal Reserve Board in response to changing economic
      conditions,


·
            reliance
      on existing or anticipated changes in laws or regulations affecting the
      activities of the banking industry and other financial service providers,
      and


·
            expectations
      regarding the nature and level of competition, changes in customer
      behavior and preferences, and the Company’s ability to execute its plans
      to respond effectively.





Because
it is uncertain whether future conditions and events will confirm these
assumptions, there is a risk that the Company’s future results will differ
materially from what is stated or implied by such forward-looking
statements.  The Company cautions the reader to consider this
risk.




The
Company undertakes no obligation to update any forward-looking statement
included in this annual report, whether as a result of new information, future
events or developments, or for any other reason.





OVERVIEW


The
Company reported a net loss of $6,000 for the year ended December 31, 2008,
compared with net income of $658,000 for the year ended December 31, 2007.
Earnings per share for the year ended December 31, 2008 are not meaningful
compared to $0.52 per share diluted for 2007. The Company successfully executed
on its growth initiatives during the year which included strong loan and deposit
growth, particularly in transaction accounts, during a year that was challenging
for many financial institutions. The decline in profitability in 2008 compared
with 2007 was due in large part to the recognition of a $1.3 million non-cash
impairment charge related to the Company’s investment in two mutual funds that
hold mortgage-backed securities, the AMF Ultra Short Mortgage Fund and the AMF
Intermediate Mortgage Fund, which were held as available-for-sale. The non-cash
impairment charge more than offset a $974,000, or 17.1%, increase in net
interest income in 2008 compared to 2007. The increase in net interest income
was largely due to a higher average balance of loans in 2008 which offset the
lower market rates of interest.






2008
Annual Report





Page
6




GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations








The
Company’s net loan portfolio amounted to $158.5 million at December 31, 2008,
compared with $118.5 million and $94.0 million at December 31, 2007 and 2006,
respectively.  The increase in net loans receivable was due to a
substantial increase in the volume of new loan originations of both residential
and commercial real estate loans. Commencing with the hiring of President
Stephen Wessel in December 2005, the Bank revised its business plan in order to
become a full service community bank and has recruited several commercial loan
officers and mortgage loan originators which have significantly contributed to
the loan growth in these segments of the portfolio. Total loan originations
increased by $29.5 million, or 52.5%, from 2007 to 2008.  In addition,
the Bank continued to sell residential mortgage loans in the secondary market to
Fannie Mae and Freddie Mac, while retaining the servicing on these loans to
maintain customer relationships and earn servicing fee income. The Bank also
sells loans to private investors without retaining the servicing on occasion.
During 2008 and 2007, the Bank sold an aggregate of $19.7 million and $15.2
million, respectively, of residential mortgage loans into the secondary market
at a gain of $277,000 and $189,000, respectively.




CRITICAL
ACCOUNTING POLICIES


The
Company prepares its financial statements in accordance with accounting
principles generally accepted in the United States of America.  Note A
to the consolidated financial statements discusses certain accounting principles
and methods of applying those principles that are particularly important to this
process.  In applying these principles to determine the amounts and
other disclosures that are presented in the financial statements and discussed
in this section, the Company is required to make certain estimates and
assumptions.




The
Company believes that the determination of its estimate of the allowance for
loan losses involves a higher degree of judgment and complexity than its
application of other significant accounting policies.  Factors
considered in this determination and the processes used by management are
discussed in Note A to the consolidated financial statements and in the
discussion below under the headings “Loans” and “Allowance for Loan
Losses.”  Although management believes it has identified appropriate
factors for review and designed and implemented adequate procedures to support
the estimation process that are consistently followed, the allowance remains an
estimate about the effect of matters that are inherently
uncertain.  Over time, changes in economic conditions or the actual or
perceived financial condition of Guaranty’s credit customers or other factors
can materially impact the allowance estimate, potentially subjecting the Company
to significant earnings volatility.




Another
estimate requiring a high degree of judgment is the valuation allowance on the
deferred tax asset.  As operating losses can be carried forward 15
years and the Company expects positive taxable income for each year going
forward, no valuation allowance is deemed necessary on the portion of the
deferred tax asset created by net operating losses.  However, a
portion of the deferred tax asset relates to capital losses.  Tax
rules only allow these losses to be offset against future capital gains for five
years.  As it is uncertain whether the Bank will be able to realize
capital gains sufficient to fully offset these losses in the applicable five
year period, management has elected to establish an appropriate valuation
allowance for the portion of the capital loss carry-forward which is estimated
may not be utilized.  See Note I of the Consolidated Financial
Statements for further discussion of the Company’s income tax
accounting.




FINANCIAL
CONDITION


At
December 31, 2008, GS Financial Corp. reported total assets of $221.9 million
compared to $186.5 million at the end of 2007.  Average total assets
were $208.0 million for the year ended December 31, 2008 which represents an
increase of $35.4 million, or 20.5%, compared to $172.6 million for the year
ended December 31, 2007.




LOANS
AND ALLOWANCE FOR LOAN LOSSES


As
with most savings institutions, a significant portion of the Company’s assets
are comprised of loans made to its customers.  The Company engages
primarily in real estate lending, both residential and commercial.






2008
Annual Report





Page
7




GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations





In
general, credit is extended based on the current market conditions, prevailing
economic trends, the value of the underlying collateral, and the borrower’s
credit history.  The lending activities of the Company are subject to
written underwriting standards and loan origination procedures established by
the Company's Board of Directors (the “Board”) and senior officers and are
incorporated into the Company's Lending Policy which is reviewed and updated as
necessary by the Board and senior officers.  These underwriting
standards establish the manner in which loan applications are accepted and
processed.  Such standards are written to comply with all applicable
laws and regulations including but not limited to Truth-In-Lending (“Regulation
Z”) and the Real Estate Settlement Procedures Act (“RESPA”).  These
standards provide guidance regarding maximum loan amounts, acceptable rates and
terms, appraisal guidelines, disclosure requirements, credit criteria,
debt-to-income ratios, complete applications, and title
requirements.  The Lending Policy also establishes the overall
direction of the Company's lending activities within the community and forms the
basis for setting underwriting standards which limit the Company's exposure to
credit risk.




The
outstanding balance of total loans at December 31, 2008 and 2007 was $161.0
million and $121.9 million, respectively, which represents an increase of $39.1
million, or 32.1%, during 2008. Total loans at December 31, 2008 had increased
by $67.9 million, or 72.9%, compared to total loans at December 31, 2004.
Average loans for 2008 were $141.9 million, up $34.1 million, or 31.6%, from the
prior year’s average level of $107.8 million.  Table 1, which is based
on regulatory reporting codes, shows loan balances at year-end of the most
recent five years.





TABLE
      1. COMPOSITION OF LOAN PORTFOLIOAt
      December 31,($
      in thousands)
                
                2008
                
                
                2007
                
                
                2006
                
                
                2005
                
                
                2004Real
      estate loans - residential
                
                $
                76,278
                
                
                $
                62,481
                
                
                $
                48,610
                
                
                $
                36,800
                
                
                $
                45,007Real
      estate loans - commercial and other
                
                
                67,616
                
                
                
                45,757
                
                
                
                36,896
                
                
                
                24,794
                
                
                
                36,143Real
      estate loans - construction
                
                
                10,542
                
                
                
                9,074
                
                
                
                9,089
                
                
                
                11,282
                
                
                
                8,233Consumer
      loans
                
                
                1,713
                
                
                
                913
                
                
                
                677
                
                
                
                669
                
                
                
                629Commercial
      business loans
                
                
                4,807
                
                
                
                3,625
                
                
                
                2,445
                
                
                
                1,819
                
                
                
                3,058Total
      loans at year-end
                
                $
                160,956
                
                
                $
                121,850
                
                
                $
                97,717
                
                
                $
                75,364
                
                
                $
                93,070Allowance
      for loan losses
                
                
                (2,719
                )
                
                
                (3,432
                )
                
                
                (3,732
                )
                
                
                (5,713
                )
                
                
                (920
                )Deferred
      loan origination costs
                
                
                286
                
                
                
                59
                
                
                
                2
                
                
                
                6
                
                
                
                8Net
      loans at year end
                
                
                158,523
                
                
                
                118,477
                
                
                
                93,987
                
                
                
                69,657
                
                
                
                92,158Average
      total loans during year
                
                $
                141,892
                
                
                $
                107,785
                
                
                $
                87,360
                
                
                $
                87,437
                
                
                $
                87,185








The
Company’s investment in residential real estate loans, which includes those
loans secured by one-to- four family dwellings (also referred to as
“single-family”), increased $13.8 million, or 22.1%, from December 31, 2007 to
2008. Home equity lines of credit (“HELOCs”), which constitute $6.9 million of
the Bank’s residential real estate loans as of December 31, 2008, increased by
$3.9 million, or 132.9%, from $3.0 million at December 31, 2007. In 2007,
residential real estate loans increased due to the hiring of an experienced
mortgage loan originator, the expansion of loan product offerings, and enhanced
marketing. These efforts also contributed to the growth in this segment of the
loan portfolio during 2008.




The
Company has a commercial loan committee consisting of board members that
evaluates the commercial loan applications of significant size and complexity.
For the last several years, the Company focused its lending efforts towards the
commercial real estate market to diversify and enhance the products and services
offered to its customers while adding higher yielding loans to its overall
portfolio.  Commercial real estate loans typically carry higher yields
and risk when compared to loans secured by one-to-four family
dwellings.  The Company offers real estate loans on multifamily
residential dwellings, commercial real estate, and vacant land.  The
Company also offers asset-based commercial loans which are secured by collateral
other than real estate, such as inventory and accounts receivable; however, the
Company does not actively solicit non-real estate commercial loans.








2008
Annual Report





Page
8


GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations


During
2008 and 2007, the Company was able to develop significant new business in
commercial real estate loans.  Commercial real estate loans, including
owner-occupied buildings, multifamily dwellings, and retail property, increased
$21.9 million, or 47.8%, between December 31, 2007 and
2008.  Commercial real estate and construction loans in the aggregate
made up 48.6% and 45.0% of the total loan portfolio at December 31, 2008 and
2007, respectively.




For
the year ended December 31, 2008, the Bank’s total loan originations amounted to
$85.7 million compared to $56.2 million for the year ended December 31,
2007.  The increase in commercial real estate lending during these
years was due to the Bank’s hiring experienced lending professionals in this
area of expertise.  Table 2 reflects the Company’s total loan
origination and repayment experience during the periods indicated.





TABLE
      2. LOAN ORIGINATIONS BY TYPEYear
      Ended December 31,($
      in thousands)
                  
                  2008
                  
                  
                  2007
                  
                  
                  2006Real
      estate loans - residential
                  
                  $
                  38,145
                  
                  
                  $
                  35,575
                  
                  
                  $
                  20,487Real
      estate loans - commercial and other
                  
                  
                  31,228
                  
                  
                  
                  15,447
                  
                  
                  
                  16,398Real
      estate loans - construction
                  
                  
                  11,340
                  
                  
                  
                  3,684
                  
                  
                  
                  2,432Commercial
      loans
                  
                  
                  2,689
                  
                  
                  
                  949
                  
                  
                  
                  2,332Consumer
      loans
                  
                  
                  2,323
                  
                  
                  
                  547
                  
                  
                  
                  345Total
      originations
                  
                  
                  85,725
                  
                  
                  
                  56,202
                  
                  
                  
                  41,994Loan
      principal repayments
                  
                  
                  (25,106
                  )
                  
                  
                  (16,963
                  )
                  
                  
                  (18,108
                  )Loans
      sold
                  
                  
                  (19,723
                  )
                  
                  
                  (15,182
                  )
                  
                  
                  (1,353
                  )Net
      portfolio activity
                  
                  $
                  40,896
                  
                  
                  $
                  24,057
                  
                  
                  $
                  22,533








Table
3 reflects contractual loan maturities which have not been adjusted for
scheduled principal reductions or prepayment opportunities.  Loans
payable on demand and loans which have no stated maturity are reported as due in
one year or less.





TABLE
      3. LOAN MATURITIES BY TYPEAt
      December 31, 2008, Loans Maturing In($
      in thousands)
                    
                    One
      year or less
                    
                    
                    One
      through five years
                    
                    
                    More
      than five years
                    
                    
                    TotalReal
      estate loans – residential
                    
                    $
                    15,836
                    
                    
                    $
                    15,562
                    
                    
                    $
                    53,469
                    
                    
                    $
                    84,867Real
      estate loans – commercial and other
                    
                    
                    8,489
                    
                    
                    
                    40,574
                    
                    
                    
                    20,506
                    
                    
                    
                    69,569Commercial
      loans
                    
                    
                    1,721
                    
                    
                    
                    2,985
                    
                    
                    
                    101
                    
                    
                    
                    4,807Consumer
      loans
                    
                    
                    270
                    
                    
                    
                    155
                    
                    
                    
                    1,288
                    
                    
                    
                    1,713Total
                    
                    $
                    26,316
                    
                    
                    $
                    59,276
                    
                    
                    $
                    75,364
                    
                    
                    $
                    160,956Percentage
                    
                    
                    16.4
                    %
                    
                    
                    36.8
                    %
                    
                    
                    46.8
                    %
                    
                    
                    100.0
                    %








Most
of the Bank’s outstanding loans carry a fixed rate of interest. However, certain
commercial loans are tied to the Guaranty Savings Bank Prime rate, construction
loans and home equity lines of credit are indexed based on the New York Prime
rate, and credit card loans have floating interest rates which are based on the
Wall Street Prime rate. Table 4 summarizes the Company’s loan balances by
interest rates types, which are scheduled to mature or re-price after December
31, 2009.








2008
Annual Report





Page
9


GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations


TABLE
      4. LOAN INTEREST RATES BY TYPEAt
      December 31, 2008, Loans Due After December 31, 2009($
      in thousands)
                    
                    Variable
      rate
                    
                    
                    Fixed
      rate
                    
                    
                    TotalReal
      estate loans – residential
                    
                    $
                    6,184
                    
                    
                    $
                    62,847
                    
                    
                    $
                    69,031Real
      estate loans – commercial and other
                    
                    
                    3,088
                    
                    
                    
                    57,992
                    
                    
                    
                    61,080Commercial
      loans
                    
                    
                    193
                    
                    
                    
                    2,893
                    
                    
                    
                    3,086Consumer
      loans
                    
                    
                    61
                    
                    
                    
                    1,382
                    
                    
                    
                    1,443Total
                    
                    $
                    9,526
                    
                    
                    $
                    125,114
                    
                    
                    $
                    134,640Percentage
                    
                    
                    7.1
                    %
                    
                    
                    92.9
                    %
                    
                    
                    100.0
                    %








All
loans carry a degree of credit risk. Management’s evaluation of this risk is
ultimately reflected in the estimate of probable loan losses that is reported in
the Company’s financial statements as the allowance for loan losses. As a result
of this ongoing evaluation, any additions to the allowance for loan losses are
reflected in the provision for loan losses and charged to operating
expense.




In
an effort to maintain the quality of the Company’s investment in
interest-earning assets, an asset classification policy was established in order
to draw attention to assets before collection becomes a problem. This policy
also helps to ensure the accurate reporting of the Company’s assets from a
valuation standpoint.  As part of this policy, all of the Company’s
loans are reviewed on a regular basis.  Payment histories as well as
the value of the underlying collateral are reviewed and assessed in light of
several risk factors.  The evaluation process considers the state of
the local economy as well as current and projected interest
rates.  Other risk factors considered include the level of credit
concentration the customer has with the Company, environmental factors which
could impair the value of the underlying collateral, or other factors which may
impair the ability of the Company to collect all of its investment.




The
Company maintains a “Watch List” of loans which is part of management’s internal
asset classification system.  The Watch List assigns classifications
to assets such as “substandard”, “doubtful”, or “loss” pursuant to OTS
regulations.  Assets which contain risk factors indicative of those
which may prevent full collection of principal are classified as
substandard.  Such risk factors include, but are not limited to, late
payments on loans or deterioration of the underlying collateral.




Loan
collection efforts in the form of past due notices commence when loan payments
are more than 15 days past due.  Once a loan reaches 16 days past due
status, the Company’s collection department initiates personal contact with the
borrower.  When a loan becomes 90 days past due, the Company initiates
foreclosure proceedings.  Loans that are greater than 90 days past due
are placed in non-accrual status.  All interest and late charges due
on these loans are reversed in the form of reserves for uncollectible interest
and late charges.




Management
considers a variety of information sources in making its risk assessments and
establishing an allowance for loan losses that it believes is adequate to absorb
probable losses in the portfolio.  Some of the more significant
sources include analyses prepared on specific loans reviewed for impairment,
statistics on balances of loans assigned to internal risk rating categories,
reports on the composition and repayment of loan portfolios not subject to
individual risk ratings, and factors derived from historical loss
experience.  In addition, management’s assessment considers general
economic conditions and how current conditions affect segments of
borrowers.  Management must also make certain judgments regarding the
level of accuracy inherent in the estimation process of the allowance for loan
losses.  Management’s Asset Quality Committee, consisting of
executive, lending, and collections personnel, meets at least quarterly to
discuss the status of all potentially impaired loans.  Based on these
evaluations, an allowance analysis is prepared at least quarterly that
summarizes the results of the evaluation process and helps to ensure this
consistency of this process.






2008
Annual Report





Page
10


GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations


At
December 31, 2008, the allowance for loan losses was $2.7 million, or 1.69% of
total loans, compared to $3.4 million, or 2.82% of total loans, at the end of
2007.  There was a total of $713,000 in loans charged-off against the
allowance for loan losses during 2008, and no loans were charged off during the
year ended December 31, 2007.  As a result of the credit quality in
2007 exceeding the expectations of management, a $300,000 reversal of the
provision for loan losses was recorded in 2007.  Table 5 presents an
analysis of the activity in the allowance for loan losses for the past five
years.





TABLE
      5. SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOSSESYear
      Ended December 31,($
      in thousands)
                
                2008
                
                
                2007
                
                
                2006
                
                
                2005
                
                
                2004Balance
      at the beginning of year
                
                $
                3,432
                
                
                $
                3,732
                
                
                $
                5,713
                
                
                $
                920
                
                
                $
                601Provision
      (reversal) for loan losses charged to operations
                
                
                -
                
                
                
                (300
                )
                
                
                (1,981
                )
                
                
                4,793
                
                
                
                343Charge-offs
                
                
                (713
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (24
                )Recoveries
      of loans previously charged off
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Balance
      at the end of year
                
                $
                2,719
                
                
                $
                3,432
                
                
                $
                3,732
                
                
                $
                5,713
                
                
                $
                920Ratios:Charge-offs
      to average total loans
                
                
                0.50
                %
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                0.03
                %Provision
      for loan losses to charge-offs
                
                
                n/a
                
                
                
                n/a
                
                
                
                n/a
                
                
                
                n/a
                
                
                
                1429.17
                %Allowance
      for loan losses to loans at end of year
                
                
                1.69
                %
                
                
                2.82
                %
                
                
                3.82
                %
                
                
                7.58
                %
                
                
                0.99
                %








The
allowance for loan losses is comprised of both a general component for groups of
homogeneous loans and a specific component for loans that are reviewed
individually for impairment or for which a probable loss has been
identified.  The specific component of the allowance for loan losses
for impaired loans is based on discounted cash flows using the loan’s initial
effective interest rate, the observable market value of the loan, or the fair
value of the underlying collateral. The general component of the allowance for
loan losses is established based on historical charge-off experience which is
adjusted for factors including risk rating, industry concentration, and loan
type.




As
a result of Hurricane Katrina, the Company recorded a $4.8 million provision for
loan losses in 2005. Subsequently, recoveries from the allowance for loan losses
of $2.0 million and $300,000 were made in 2006 and 2007, respectively, based on
management’s assessment of the information available at the time regarding the
inherent level of losses in the Bank’s portfolio. Of the $4.8 million provision
made in the year ended December 31, 2005, $3.3 million was recorded specifically
on an aggregate of $8.2 million of loans deemed impaired on which no loan
payments had been received and the collateral of which suffered property damage
as a result of Hurricane Katrina.  The remaining $1.5 million of the
provision was applied to the general allowance for loan
losses.  Because the Company has recently experienced charge-offs
which it attributes to Hurricane Katrina and, in its estimation, significant
uncertainties remain regarding the performance of the loan portfolio after
Hurricane Katrina, such as the ultimate disposition of property insurance claims
and the ultimate economic recovery of greater New Orleans in a stressed national
economy, the Company has maintained the general component of the allowance for
loan losses related to the provision made after Hurricane Katrina at $1.2
million and $1.5 million at December 31, 2008 and 2007,
respectively.  Management will continue to assess the adequacy of the
allowance for loan losses and adjust it as necessary subsequent to December 31,
2008. Table 6 presents the allocation of the allowance for loan losses for the
past five years.








2008
Annual Report





Page
11


GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations


TABLE
      6. ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSESAt
      December 31,2008
                    
                    
                    2007
                    
                    
                    2006
                    
                    
                    2005
                    
                    
                    2004($
      in thousands)
                    
                    Allowance
      for loan losses
                    
                    
                    %
      of loans
                      by
      type to
                      total
      loans
                    
                    
                    Allowance
      for loan losses
                    
                    
                    %
      of loans
                      by
      type to
                      total
      loans
                    
                    
                    Allowance
      for loan losses
                    
                    
                    %
      of loans
                      by
      type to
                      total
      loans
                    
                    
                    Allowance
      for loan losses
                    
                    
                    %
      of loans
                      by
      type to
                      total
      loans
                    
                    
                    Allowance
      for loan losses
                    
                    
                    %
      of loans
                      by
      type to
                      total
      loansReal
      estate loans - residential
                    
                    $
                    896
                    
                    
                    
                    47.4
                    %
                    
                    $
                    1,169
                    
                    
                    
                    51.3
                    %
                    
                    $
                    1,177
                    
                    
                    
                    49.7
                    %
                    
                    $
                    3,332
                    
                    
                    
                    48.8
                    %
                    
                    $
                    239
                    
                    
                    
                    48.4
                    %Real
      estate loans - commercial and other
                    
                    
                    1,478
                    
                    
                    
                    42.0
                    %
                    
                    
                    1,802
                    
                    
                    
                    37.6
                    %
                    
                    
                    1,963
                    
                    
                    
                    37.8
                    %
                    
                    
                    1,805
                    
                    
                    
                    32.9
                    %
                    
                    
                    591
                    
                    
                    
                    38.8
                    %Real
      estate loans - construction
                    
                    
                    57
                    
                    
                    
                    6.5
                    %
                    
                    
                    189
                    
                    
                    
                    7.4
                    %
                    
                    
                    360
                    
                    
                    
                    9.3
                    %
                    
                    
                    292
                    
                    
                    
                    15.0
                    %
                    
                    
                    4
                    
                    
                    
                    8.8
                    %Commercial
      loans
                    
                    
                    274
                    
                    
                    
                    1.1
                    %
                    
                    
                    272
                    
                    
                    
                    0.7
                    %
                    
                    
                    232
                    
                    
                    
                    0.7
                    %
                    
                    
                    284
                    
                    
                    
                    0.9
                    %
                    
                    
                    87
                    
                    
                    
                    0.7
                    %Consumer
      loans
                    
                    
                    14
                    
                    
                    
                    3.0
                    %
                    
                    
                    -
                    
                    
                    
                    3.0
                    %
                    
                    
                    -
                    
                    
                    
                    2.5
                    %
                    
                    
                    -
                    
                    
                    
                    2.4
                    %
                    
                    
                    -
                    
                    
                    
                    3.3
                    %Total
                    
                    $
                    2,719
                    
                    
                    
                    100.0
                    %
                    
                    $
                    3,432
                    
                    
                    
                    100.0
                    %
                    
                    $
                    3,732
                    
                    
                    
                    100.0
                    %
                    
                    $
                    5,713
                    
                    
                    
                    100.0
                    %
                    
                    $
                    921
                    
                    
                    
                    100.0
                    %






Table
7 sets forth the Company’s delinquent loans at the dates
indicated.  The balances presented in Table 7 represent the total
principal balances outstanding on the loans rather than the amount of principal
past due.  There were no loans 90 days delinquent and still accruing
interest at December 31, 2008 and 2007.








TABLE
      7. DELINQUENT LOANSAt
      December 31,($
      in thousands)
                  
                  2008
                  
                  
                  2007
                  
                  
                  200630-89
      Days
                  
                  $
                  5,231
                  
                  
                  $
                  3,305
                  
                  
                  $
                  1,37990+
      Days
                  
                  
                  2,011
                  
                  
                  
                  1,438
                  
                  
                  
                  179Total
                  
                  $
                  7,242
                  
                  
                  $
                  4,743
                  
                  
                  $
                  1,558RatiosLoans
      delinquent 90 days or more to total loans
                  
                  
                  1.25
                  %
                  
                  
                  1.18
                  %
                  
                  
                  0.18
                  %Total
      delinquent loans to total loans
                  
                  
                  4.50
                  %
                  
                  
                  3.89
                  %
                  
                  
                  1.59
                  %Allowance
      for loan losses to non-accrual loans
                  
                  
                  135.21
                  %
                  
                  
                  238.66
                  %
                  
                  
                  2084.92
                  %Allowance
      for loan losses to total delinquent loans
                  
                  
                  37.54
                  %
                  
                  
                  72.36
                  %
                  
                  
                  239.54
                  %








Nonperforming
assets consists of loans on nonaccrual status and foreclosed
assets.  Table 8 summarizes the Company’s nonperforming assets, loans
greater than 90 days delinquent and accruing interest, and troubled debt
restructures at the dates indicated.





TABLE
      8. NONPERFORMING ASSETSAt
      December 31,($
      in thousands)
                
                2008
                
                
                2007
                
                
                2006
                
                
                2005
                
                
                2004Loans
      accounted for on a nonaccrual basis
                
                $
                2,011
                
                
                $
                1,438
                
                
                $
                179
                
                
                $
                3,582
                
                
                $
                894Foreclosed
      assets
                
                
                461
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Total
      nonperforming assets
                
                $
                2,472
                
                
                $
                1,438
                
                
                $
                179
                
                
                $
                3,582
                
                
                $
                894Loans
      greater than 90 days past due and accruing interest
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Troubled
      debt restructures
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -RatiosNonperforming
      assets to loans plus foreclosed assets
                
                
                1.53
                %
                
                
                1.18
                %
                
                
                0.18
                %
                
                
                4.75
                %
                
                
                0.96
                %Nonperforming
      assets to total assets
                
                
                1.11
                %
                
                
                0.77
                %
                
                
                0.11
                %
                
                
                2.02
                %
                
                
                0.45
                %Allowance
      for loan losses to nonperforming loans
                
                
                135.21
                %
                
                
                238.66
                %
                
                
                2084.92
                %
                
                
                159.49
                %
                
                
                103.02
                %








The
increase in nonaccrual loans at December 31, 2008 compared to December 31, 2007
was primarily due to one $1.4 million delinquent renovation loan that is secured
by a multifamily dwelling located in the historic district of the French Quarter
in New Orleans, Louisiana. The foreclosure proceedings on this property, which
commenced in April 2008, were extended due to the borrower’s filing for
bankruptcy relief under Chapter 11 of the US bankruptcy code in July 2008. The
borrower’s bankruptcy case was dismissed in February 2009, and the property is
expected to go to Sherriff’s sale in April 2009. As of May 24, 2008, the
appraised value of this property was $1,983,000 based on the “as is”, incomplete
condition.








2008
Annual Report





Page
12




GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations


INVESTMENT
IN SECURITIES


Interest
rates dictate many of the investment decisions and policies of the
Company.  It is the policy of the Company not to engage in speculative
purchasing, selling, or trading of investments; however, certain profits may be
taken from time to time on the sale of investment securities.  When
interest rate spreads reach acceptable levels, the Company may utilize leveraged
purchasing of investment securities, as has been done in the
past.  Also, when anticipated earnings permit, certain portfolio
adjustments may be made to enhance overall portfolio yield even though losses
may be recognized in doing so.




Management
routinely places much of the Company’s liquid assets into its investment
securities portfolio to balance its liquidity needs with the need to earn a
competitive yield.  To allow for the investment portfolio to provide
liquidity when necessary, all investment securities have been classified as
available-for-sale during the past three years.




At
December 31, 2008, total securities were $47.6 million, down $130,000, or 0.3%,
from December 31, 2007.  Mutual fund investments were 7.2% of the
total portfolio at December 31, 2008 compared with 12.1% at the prior
year-end.  Mortgage-backed securities, consisting of fixed-rate and
hybrid ARM securities issued by Fannie Mae and Freddie Mac, increased by $17.2
million, or 192.9%




During
the year ended December 31, 2008, the Company recognized a non-cash impairment
charge of $1.3 million for other-than-temporary impairments of its investment in
two mutual funds, the AMF Ultra Short Mortgage (ticker: ASARX) and the AMF
Intermediate Mortgage (ticker: ASCPX). Prior to 2008, these investments were
redeemable immediately at their current market value. In 2008, the fund
managers, Shay Assets Management, Inc., imposed a restriction on these mutual
funds which limits redemptions for cash to $250,000 per quarter based on the
current market price at the time of redemption.  Approximately, $1.1
million, $5.0 million, and $39.0 million of the holdings in these funds were
redeemed for cash in 2008, 2007, and 2006, respectively.  Table 9
shows the book value of the Company’s investment portfolio at December 31, 2008,
2007, and 2006.





TABLE
      9. COMPOSITION OF INVESTMENT SECURITIES PORTFOLIOAt
      December 31,2008
                  
                  
                  2007
                  
                  
                  2006($
      in thousands)
                  
                  Balance
                  
                  
                  Percent
                  
                  
                  Balance
                  
                  
                  Percent
                  
                  
                  Balance
                  
                  
                  PercentU.S.
      Treasury and agency securities
                  
                  $
                  10,070
                  
                  
                  
                  21.1
                  %
                  
                  $
                  18,421
                  
                  
                  
                  38.6
                  %
                  
                  $
                  23,326
                  
                  
                  
                  42.3
                  %Mortgage-backed
      securities
                  
                  
                  26,100
                  
                  
                  
                  54.8
                  %
                  
                  
                  8,912
                  
                  
                  
                  18.7
                  %
                  
                  
                  3,791
                  
                  
                  
                  6.9
                  %Collateralized
      mortgage obligations
                  
                  
                  8,039
                  
                  
                  
                  16.9
                  %
                  
                  
                  14,633
                  
                  
                  
                  30.6
                  %
                  
                  
                  17,173
                  
                  
                  
                  31.2
                  %Mutual
      funds
                  
                  
                  3,408
                  
                  
                  
                  7.2
                  %
                  
                  
                  5,781
                  
                  
                  
                  12.1
                  %
                  
                  
                  10,800
                  
                  
                  
                  19.6
                  %Total
      investment securities at year end
                  
                  $
                  47,617
                  
                  
                  
                  100.0
                  %
                  
                  $
                  47,747
                  
                  
                  
                  100.0
                  %
                  
                  $
                  55,090
                  
                  
                  
                  100.0
                  %Average
      investment securities during year
                  
                  $
                  49,113
                  
                  
                  
                  
                  
                  
                  $
                  50,452
                  
                  
                  
                  
                  
                  
                  $
                  68,469





Information
about the contractual maturity and weighted-average yield of the Company’s
investment securities at December 31, 2008 is shown in Table 10
below.  At December 31, 2008, 7.2% of the investment portfolio
consisted of mutual fund or equity investments carrying no stated maturity. Debt
securities with scheduled repayments, such as mortgage-backed-securities and
collateralized mortgage obligations, which in aggregate represent 71.7% of the
investment portfolio at December 31, 2008, are not presented in Table
10.  As the Company owned no tax-exempt securities during the periods
presented, no yield adjustments were necessary.






2008
Annual Report





Page
13




GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations


TABLE
      10. DISTRIBUTION OF INVESTMENT SECURITY MATURITIESAt
      December 31, 2008($
      in thousands)
                
                One
      year or less
                
                
                Over
      one through five years
                
                
                Over
      five through ten years
                
                
                Over
      ten years
                
                
                TotalAmount
                
                
                Yield
                
                
                Amount
                
                
                Yield
                
                
                Amount
                
                
                Yield
                
                
                Amount
                
                
                Yield
                
                
                Amount
                
                
                YieldU.S.
      Treasury and agency securities
                
                $
                -
                
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                $
                10,070
                
                
                
                5.50
                %
                
                $
                10,070
                
                
                
                5.50
                %Total
                
                $
                -
                
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                $
                10,070
                
                
                
                5.50
                %
                
                $
                10,070
                
                
                
                5.50
                %Percentage
      of Total
                
                
                0.0
                %
                
                
                
                
                
                
                0.0
                %
                
                
                
                
                
                
                0.0
                %
                
                
                
                
                
                
                100.0
                %
                
                
                
                
                
                
                100.0
                %





All
of the Company’s investments in marketable securities were classified as
available-for–sale at December 31, 2008 and 2007.  The net unrealized
losses on these investments totaled $320,000, or 0.7%, of amortized cost at
December 31, 2008.  At year-end 2007, there was a net unrealized loss
of $167,000, or 0.4% of amortized cost.  The reported amount of net
unrealized gain or loss varies based on the overall changes in market rates,
shifts in the slope of the yield curve, and movement in spreads to the yield
curve for different types of securities.




At December 31, 2008, the Company had certain
investment concentrations exceeding 10% of stockholders’
equity.  Investments of the Company that exceed 10% of stockholders’
equity at December 31, 2008 are shown in Table 11 below.





TABLE
      11. INVESTMENT SECURITIES GREATER THAN 10% OF STOCKHOLDERS'
      EQUITYAt
      December 31, 2008($
      in thousands)
                    Type
                    
                    Total
      Investment
                    
                    
                    %
      of Total Assets
                    
                    
                    %
      of Stockholders' EquityFederal
      National Mortgage Association
                    Agency
      Bond and Mortgage-Backed Securities
                    
                    $
                    20,624
                    
                    
                    
                    9.3
                    %
                    
                    
                    74.8
                    %Shay
      AMF Mutual Funds
                    Mutual
      Fund
                    
                    
                    3,408
                    
                    
                    
                    1.5
                    %
                    
                    
                    12.4
                    %Federal
      Home Loan Mortgage Corporation
                    Mortgage-Backed
      Securities
                    
                    
                    8,843
                    
                    
                    
                    4.0
                    %
                    
                    
                    32.1
                    %Federal
      Home Loan Bank
                    Agency
      Bond
                    
                    
                    5,131
                    
                    
                    
                    2.3
                    %
                    
                    
                    18.6
                    %Total
                    
                    
                    $
                    38,006
                    
                    
                    
                    17.1
                    %
                    
                    
                    137.9
                    %








At
December 31, 2007, the Company had $3.5 million in agency securities classified
as available for sale that were investments in financial instruments or
participated in agreements with values that are linked to or derived from
changes in some underlying asset or index.  These financial
instruments or agreements are commonly referred to as derivatives and include
such instruments as futures, forward contracts, option contracts, interest rate
swap agreements and other financial arrangements with similar
characteristics.  The Company’s investments in derivatives consisted
of two “range notes” issued by the Federal Home Loan Bank.  These
notes were long-term agency bonds which paid interest as long as LIBOR fell
within a certain range.  LIBOR was within the required range for
interest to be paid during the period in which the Company held these
derivatives. These investments were called in 2008. As of December 31, 2008, the
Company did not have any investments in derivative securities. The impact of
SFAS 133, which requires marking these securities to market value through
operations, was not material in 2008 or 2007.





DEPOSITS


Deposits
are the Company’s primary source of funding for earning assets.  The
Company offers a variety of products designed to attract and retain
customers.  The principal methods used by the Company to attract
deposits include: emphasis on personal service, offering competitive interest
rates, and providing convenient office locations.  The Company does
not actively solicit or pay higher rates for “jumbo” (amounts over $100,000)
certificates of deposit.  The Company had no deposits that were
obtained through outside deposit brokers at December 31, 2008 or
2007.








2008
Annual Report





Page
14




GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations


At
December 31, 2008, deposits were up $10.6 million, or 8.2%, from the level at
December 31, 2007.  Average deposits for 2008 increased $8.9 million,
or 7.0%, over 2007 and increased $2.9 million, or 2.3%, in 2007 from
2006.  The increases in deposits have been due to a combination of
factors including: the efforts of the commercial loan originators to open
non-interest bearing transactional accounts for commercial customers, the
offering of competitive interest rates on money market and certain transactional
accounts in an effort to attract new customers, and the opening of new banking
locations which occurred in the latter half of 2007.





TABLE
      12. DEPOSIT COMPOSITIONAt
      December 31,2008
                  
                  
                  2007
                  
                  
                  2006($
      in thousands)
                  
                  Average
      Balances
                  
                  
                  %
      of Deposits
                  
                  
                  Average
      Balances
                  
                  
                  %
      of Deposits
                  
                  
                  Average
      Balances
                  
                  
                  %
      of DepositsNoninterest
      bearing demand deposits
                  
                  $
                  8,915
                  
                  
                  
                  6.6
                  %
                  
                  $
                  4,380
                  
                  
                  
                  3.5
                  %
                  
                  $
                  2,367
                  
                  
                  
                  1.9
                  %NOW
      account deposits
                  
                  
                  26,134
                  
                  
                  
                  19.3
                  %
                  
                  
                  21,576
                  
                  
                  
                  17.1
                  %
                  
                  
                  17,186
                  
                  
                  
                  13.9
                  %Savings
      deposits
                  
                  
                  17,074
                  
                  
                  
                  12.6
                  %
                  
                  
                  20,511
                  
                  
                  
                  16.2
                  %
                  
                  
                  27,103
                  
                  
                  
                  22.0
                  %Certificates
      of deposit
                  
                  
                  83,167
                  
                  
                  
                  61.5
                  %
                  
                  
                  79,911
                  
                  
                  
                  63.2
                  %
                  
                  
                  76,841
                  
                  
                  
                  62.2
                  %Total
                  
                  $
                  135,290
                  
                  
                  
                  100.0
                  %
                  
                  $
                  126,378
                  
                  
                  
                  100.0
                  %
                  
                  $
                  123,497
                  
                  
                  
                  100.0
                  %








Average
certificates of deposit (or “time deposits”) totaled $83.2 million, or 61.5% of
average total deposits during 2008, up $3.3 million, or 4.1%, compared to
2007.  Average savings deposits made up 12.6% of total average
deposits during 2008, down from 16.2% in the previous year.  During
2008, the average balance of NOW accounts, which includes money market deposit
accounts, increased from 17.1% to 19.3% of average total
deposits.  Non-interest bearing demand deposits increased by $4.5
million, or 103.5%, as the Bank continued to increase its volume of activity
with commercial customers.  Table 13 shows the maturity structure of
time deposits over and under $100,000 at December 31, 2008.





TABLE
      13. MATURITIES OF TIME DEPOSITSAt
      December 31, 2008Less than
                                                  
                                                  
                                                  More than
                                                  
                                                  
                                                  Total($
      in thousands)
                                                  
                                                  $100,000
                                                  
                                                  
                                                  $100,000
                                                  
                                                  
                                                  Amount
                                                  
                                                  
                                                  PercentageThree
      months or less
                                                  
                                                  $
                                                  13,575
                                                  
                                                  
                                                  $
                                                  8,497
                                                  
                                                  
                                                  $
                                                  22,072
                                                  
                                                  
                                                  
                                                  26.3
                                                  %Over
      three months through six months
                                                  
                                                  
                                                  11,106
                                                  
                                                  
                                                  
                                                  2,654
                                                  
                                                  
                                                  
                                                  13,760
                                                  
                                                  
                                                  
                                                  16.4
                                                  %Over
      six months through twelve months
                                                  
                                                  
                                                  17,687
                                                  
                                                  
                                                  
                                                  7,610
                                                  
                                                  
                                                  
                                                  25,297
                                                  
                                                  
                                                  
                                                  30.1
                                                  %Over
      twelve months
                                                  
                                                  
                                                  18,528
                                                  
                                                  
                                                  
                                                  4,342
                                                  
                                                  
                                                  
                                                  22,870
                                                  
                                                  
                                                  
                                                  27.2
                                                  %Total
                                                  
                                                  $
                                                  60,896
                                                  
                                                  
                                                  $
                                                  23,103
                                                  
                                                  
                                                  $
                                                  83,999
                                                  
                                                  
                                                  
                                                  100.0
                                                  %








BORROWINGS


The
Bank is a member of the Federal Home Loan Bank of Dallas
(“FHLB”).  This membership provides access to a variety of Federal
Home Loan Bank advance products as an alternative source of
funds.  FHLB advances increased during the year by $25.0 million, or
92.7%, from $27.0 million at December 31, 2007 to $52.0 million at December 31,
2008. The increase was due to new borrowings in 2008 which were primarily used
to fund loan growth.  Average advances outstanding during 2008 were
$43.0 million, compared with $17.6 million for 2007.  The average rate
paid on FHLB advances during 2008 was 4.11%, compared to 5.47% in
2007.  The Company’s utilization of borrowings continues to be within
the parameters determined by management to be prudent in terms of liquidity and
interest rate sensitivity. In addition, the Company has significant remaining
borrowing capacity should borrowing needs arise.  Table 14 shows the
scheduled maturities of FHLB advances at December 31, 2008.








2008
Annual Report





Page
15


GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations


TABLE
      14. MATURITIES OF ADVANCESAt
      December 31, 2008($
      in thousands)
                        
                        Amount
                        
                        
                        %
      of Total Advances
                        
                        
                        Weighted
      Average Rate2009
                        
                        $
                        13,174
                        
                        
                        
                        25.3
                        %
                        
                        
                        2.47
                        %2010
                        
                        
                        15,578
                        
                        
                        
                        30.0
                        %
                        
                        
                        4.44
                        %2011
                        
                        
                        12,583
                        
                        
                        
                        24.2
                        %
                        
                        
                        3.50
                        %2012
                        
                        
                        7,667
                        
                        
                        
                        14.7
                        %
                        
                        
                        4.77
                        %2013
                        
                        
                        3,000
                        
                        
                        
                        5.8
                        %
                        
                        
                        4.14
                        %Total
      Advances
                        
                        $
                        52,002
                        
                        
                        
                        100.0
                        %
                        
                        
                        3.75
                        %








STOCKHOLDERS’
EQUITY AND CAPITAL ADEQUACY


At
December 31, 2008, stockholders’ equity totaled $27.6 million, compared to $28.2
million at the end of 2007.  The major factors in the $606,000
decrease in 2008 were the aggregate cash dividends paid of approximately
$509,000 and an increase in the accumulated other comprehensive loss of
$106,000.  The dividend payout ratio for 2008 was not meaningful as
the company recorded a net loss for the year compared to 76.4% of net income in
2007.




Since
1998, the Company has repurchased shares of its common stock when shares have
been available at prices and amounts deemed prudent by
management.  The Company announced a stock repurchase program in
October 2008 of up to 64,250 shares, or approximately 5.0%, of GS Financial
Corporation’s outstanding common stock through open market or privately
negotiated transactions. As of December 31, 2008, no shares had been repurchased
under the newly announced program. Table 15 summarizes the repurchase of the
shares of its common stock by year.  All of the purchases were open
market transactions and most were at a discount to book value.





TABLE
      15. SUMMARY OF STOCK REPURCHASESYear
      Ended December 31,
                    
                    Shares
                    
                    
                    Cost
      ($000)
                    
                    
                    Average
      Price Per Share1998
                    
                    
                    491,054
                    
                    
                    $
                    8,324
                    
                    
                    $
                    16.951999
                    
                    
                    299,000
                    
                    
                    
                    3,653
                    
                    
                    
                    12.222000
                    
                    
                    679,600
                    
                    
                    
                    8,590
                    
                    
                    
                    12.642001
                    
                    
                    305,684
                    
                    
                    
                    4,612
                    
                    
                    
                    15.092002
                    
                    
                    142,201
                    
                    
                    
                    2,516
                    
                    
                    
                    17.692003
                    
                    
                    216,181
                    
                    
                    
                    4,109
                    
                    
                    
                    19.012004
                    
                    
                    16,842
                    
                    
                    
                    315
                    
                    
                    
                    18.942005
                    
                    
                    3,907
                    
                    
                    
                    74
                    
                    
                    
                    19.062006
                    
                    
                    17,763
                    
                    
                    
                    300
                    
                    
                    
                    16.872007
                    
                    
                    10,468
                    
                    
                    
                    188
                    
                    
                    
                    18.002008
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Total
      Stock Repurchases
                    
                    
                    2,182,700
                    
                    
                    $
                    32,681
                    
                    
                    $
                    14.97








The
ratios in Table 16 indicate that the Bank was well capitalized at December 31,
2008.  During 2008 and 2007, the Bank has reduced its overcapitalized
position as it has increased its holdings of loans. Risk-based capital ratios
declined in 2008 as there was a $37.7 million increase in risk-weighted assets,
attributable primarily to growth in the loan portfolio.  The
regulatory capital ratios of Guaranty Savings Bank exceed the minimum required
ratios, and the Bank has been categorized as “well-capitalized” in the most
recent notice received from its primary regulatory agency.






2008
Annual Report





Page
16





GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations


TABLE
      16. CAPITAL AND RISK BASED CAPITAL RATIOSAt
      December 31,($
      in thousands)
                  
                  2008
                  
                  
                  2007
                  
                  
                  2006Tier
      1 regulatory capital
                  
                  $
                  25,611
                  
                  
                  $
                  27,107
                  
                  
                  $
                  26,580Tier
      2 regulatory capital
                  
                  
                  1,772
                  
                  
                  
                  1,260
                  
                  
                  
                  1,096Total
      regulatory capital
                  
                  $
                  27,383
                  
                  
                  $
                  28,367
                  
                  
                  $
                  27,676Adjusted
      total assets
                  
                  $
                  221,614
                  
                  
                  $
                  184,660
                  
                  
                  $
                  167,126Risk-weighted
      assets
                  
                  $
                  141,772
                  
                  
                  $
                  104,027
                  
                  
                  $
                  87,645RatiosTier
      1 capital to adjusted total assets
                  
                  
                  11.56
                  %
                  
                  
                  14.68
                  %
                  
                  
                  15.90
                  %Tier
      1 capital to risk-weighted assets
                  
                  
                  18.06
                  %
                  
                  
                  26.06
                  %
                  
                  
                  30.33
                  %Total
      regulatory capital to risk-weighted assets
                  
                  
                  19.31
                  %
                  
                  
                  27.27
                  %
                  
                  
                  31.58
                  %Stockholders'
      equity to total assets
                  
                  
                  12.42
                  %
                  
                  
                  15.10
                  %
                  
                  
                  16.14
                  %








LIQUIDITY
AND CAPITAL RESOURCES


The
objective of liquidity management is to ensure that funds are available to meet
the cash flow requirements of depositors and borrowers, while at the same time
meeting the operating, capital, and strategic cash flow needs of the Company and
the Bank, in the most cost-effective manner possible.  The Company
develops its liquidity management strategies and measures and monitors liquidity
risk as part of its overall asset/liability management process by making use of
quantitative modeling tools to project cash flows under a variety of possible
scenarios.




On
the liability side, liquidity management focuses on growing the base of more
stable core deposits at competitive rates, while at the same time ensuring
access to economical wholesale funding sources.  The sections above on
deposits and borrowings discuss changes in these liability-funding sources in
2008.




Liquidity
management on the asset side primarily addresses the composition and maturity
structure of the loan and investment securities portfolios and their impact on
the Company’s ability to generate cash flows from scheduled payments,
contractual maturities and prepayments, their use as collateral for borrowings,
and possible outright sales on the secondary market.  Tables 3 and 10
above present the contractual maturities of the loan portfolio and the Company’s
investment in securities.




Table
17 illustrates some the factors that the Company uses to measure
liquidity.  Cash and cash equivalents decreased substantially during
2008 after experiencing a slight decrease in 2007. While deposits have increased
in both 2008 and 2007, primarily through continued efforts to attract commercial
and personal transaction accounts, their rate of increase was not sufficient to
meet the funding requirements of loan originations. In order to continue funding
loan growth, the Company utilized FHLB advances as a low cost, alternative
funding source during 2008.




The
Company’s investment allocation decisions and loan and deposit pricing
strategies reflect its assessment of current and future economic
conditions.






2008
Annual Report





Page
17





GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations


TABLE
      17. KEY LIQUIDITY INDICATORSAt
      December 31,($
      in thousands)
                  
                  2008
                  
                  
                  2007
                  
                  
                  2006Cash
      and cash equivalents
                  
                  $
                  3,205
                  
                  
                  $
                  9,462
                  
                  
                  $
                  11,117Total
      loans
                  
                  
                  160,956
                  
                  
                  
                  121,850
                  
                  
                  
                  97,717Total
      deposits
                  
                  
                  140,115
                  
                  
                  
                  129,510
                  
                  
                  
                  122,754Deposits
      $100,000 and over
                  
                  
                  54,620
                  
                  
                  
                  35,586
                  
                  
                  
                  27,285RatiosTotal
      loans to total deposits
                  
                  
                  114.87
                  %
                  
                  
                  94.09
                  %
                  
                  
                  79.60
                  %Deposits
      $100,000 and over to total deposits
                  
                  
                  38.98
                  %
                  
                  
                  27.48
                  %
                  
                  
                  22.23
                  %








ASSET/LIABILITY
MANAGEMENT


The
objective of the Company’s asset/liability management is to implement strategies
for the funding and deployment of its financial resources that are expected to
maximize profitability over time at acceptable levels of risk.




Interest
rate sensitivity measures the potential impact of changing rate environments on
both net interest income and cash flows.  The Bank monitors its
interest rate sensitivity on a quarterly basis by reviewing net interest income
simulations, monitoring the economic value of equity, reviewing interest rate
risk management models, and reviewing net portfolio value (“NPV”)
models.




At
least quarterly, the Bank utilizes the services of a third party vendor to
produce an interest rate risk management model. The interest rate risk
management model quantifies the risks to the Bank from a variety of sources,
including repricing risk, basis risk, prepayment risk, and production risks. The
actual risks measured are dependent upon the assumptions made by management
prior to processing the model. From this information forecasted balance sheets,
income statements, and yield calculations are produced. Additionally, an
estimate of the economic value at risk (“EVE”) for each balance sheet item and
earnings at risk (“EAR”) for each income statement is produced based on the
current balances and yields using standardized discount rates.




The
EVE measures the Bank’s exposure to equity shifts due to changes in a forecast
interest rate environment. EVE is normally expressed as a percentage change from
the “Base Case” value, or as a percentage of the economic value of the assets.
EAR measures the Bank’s exposure to net interest income due to changes in a
forecast rate environment. This change is the result of repricing of assets and
liabilities, embedded caps and floors, and changes in the cash flow due to call
options and prepayment. EAR is normally expressed as a percentage change from
the “Base Case”.




Table 18
includes a summary of the changes in the components of the balance sheet at
December 31, 2008 and the income statement for the year ended December 31,
2009,  based on a non-parallel shift in interest rates up and down 300
basis points, using increments of 100 basis points. As illustrated in the table
below, EVE is currently more sensitive to and may be more negatively impacted by
rising rates than falling rates. However, EAR is slightly more sensitive to and
may be more negatively impacted by falling rates than rising
rates.






2008
Annual Report





Page
18





GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations





TABLE
      18. ECONOMIC VALUE AT RISK AND EARNINGS AT RISKChange
      (Basis Point) in Interest Rates($
      in thousands)
                          
                          Down
      300
                          
                          
                          Down
      200
                          
                          
                          Down
      100
                          
                          
                          Base
      Case
                          
                          
                          Up
      100
                          
                          
                          Up
      200
                          
                          
                          Up
      300At
      December 31, 2008Total
      assets
                          
                          $
                          228,708
                          
                          
                          $
                          227,255
                          
                          
                          $
                          225,412
                          
                          
                          $
                          223,125
                          
                          
                          $
                          219,321
                          
                          
                          $
                          214,962
                          
                          
                          $
                          210,284Total
      liabilities
                          
                          
                          211,145
                          
                          
                          
                          209,239
                          
                          
                          
                          206,588
                          
                          
                          
                          203,517
                          
                          
                          
                          200,543
                          
                          
                          
                          198,216
                          
                          
                          
                          195,775Economic
      value of equity
                          
                          
                          17,563
                          
                          
                          
                          18,016
                          
                          
                          
                          18,824
                          
                          
                          
                          19,608
                          
                          
                          
                          18,778
                          
                          
                          
                          16,746
                          
                          
                          
                          14,509EVE
      at risk
                          
                          
                          -10.43
                          %
                          
                          
                          -8.12
                          %
                          
                          
                          -4.00
                          %
                          
                          
                          n/a
                          
                          
                          
                          -4.23
                          %
                          
                          
                          -14.60
                          %
                          
                          
                          -26.00
                          %For
      the Year Ended December 31, 2009Interest
      income
                          
                          
                          13,143
                          
                          
                          
                          13,413
                          
                          
                          
                          13,681
                          
                          
                          
                          13,999
                          
                          
                          
                          14,440
                          
                          
                          
                          14,711
                          
                          
                          
                          14,946Interest
      expense
                          
                          
                          5,440
                          
                          
                          
                          5,632
                          
                          
                          
                          5,921
                          
                          
                          
                          6,233
                          
                          
                          
                          6,534
                          
                          
                          
                          6,875
                          
                          
                          
                          7,199Net
      interest income
                          
                          
                          7,703
                          
                          
                          
                          7,781
                          
                          
                          
                          7,760
                          
                          
                          
                          7,766
                          
                          
                          
                          7,906
                          
                          
                          
                          7,836
                          
                          
                          
                          7,747Earnings
      at risk
                          
                          
                          -0.82
                          %
                          
                          
                          0.19
                          %
                          
                          
                          -0.09
                          %
                          
                          
                          n/a
                          
                          
                          
                          1.79
                          %
                          
                          
                          0.89
                          %
                          
                          
                          -0.24
                          %







The
NPV is the difference between the market value of the Bank’s assets and the
market value of the Bank’s liabilities and off balance sheet
commitments.  At least quarterly, the Board reviews a standard thrift
industry model prepared by the Office of Thrift Supervision (“OTS”) from the
Bank’s quarterly Consolidated Maturity and Rate Report.




Table
19below presents
an analysis of the Bank’s interest rate risk as measured by the OTS which
reflects changes in the NPV for instantaneous and sustained parallel shifts in
the yield curve, in 100 basis point increments, up and down 300 basis points in
accordance with OTS regulations.  Due to the low level of interest
rates, the only downward shock capable of being applied is 100 basis points at
December 31, 2008 and 100 and 200 basis points at December 31,
2007.  As illustrated in the table below, NPV is currently more
sensitive to, and may be more negatively impacted by, rising rates than falling
rates.





TABLE
      19. NET PORTFOLIO VALUEAt
      December 31,($
      in thousands)
                                
                                
                                2008
                                
                                
                                2007Change
      (Basis Point) in Interest Rates
                                
                                
                                $
      Value
                                
                                
                                $
      Change
                                
                                
                                %
      Change
                                
                                
                                $
      Value
                                
                                
                                $
      Change
                                
                                
                                %
      Change300
                                
                                
                                $
                                19,357
                                
                                
                                $
                                (9,756
                                )
                                
                                
                                -34
                                %
                                
                                $
                                23,861
                                
                                
                                $
                                (11,632
                                )
                                
                                
                                -33
                                %200
                                
                                
                                
                                23,237
                                
                                
                                
                                (5,876
                                )
                                
                                
                                -20
                                %
                                
                                
                                27,686
                                
                                
                                
                                (7,807
                                )
                                
                                
                                -22
                                %100
                                
                                
                                
                                26,610
                                
                                
                                
                                (2,503
                                )
                                
                                
                                -9
                                %
                                
                                
                                31,396
                                
                                
                                
                                (4,097
                                )
                                
                                
                                -12
                                %0
                                
                                
                                
                                29,113
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                35,493
                                
                                
                                
                                -
                                
                                
                                
                                --100
                                
                                
                                
                                30,756
                                
                                
                                
                                1,643
                                
                                
                                
                                6
                                %
                                
                                
                                37,876
                                
                                
                                
                                2,383
                                
                                
                                
                                7
                                %-200
                                
                                
                                
                                n/a
                                
                                
                                
                                n/a
                                
                                
                                
                                n/a
                                
                                
                                
                                40,123
                                
                                
                                
                                4,630
                                
                                
                                
                                13
                                %








IMPACT
OF INFLATION AND CHANGING PRICES


The
majority of assets and liabilities of a financial institution are monetary in
nature.  Management believes the most significant potential impact of
inflationary or deflationary economic cycles on the Company’s financial results
is its ability to react to changes in interest rates.  Interest rates
do not necessarily move in the same direction, or at the same magnitude, as the
prices of goods and services.  As discussed above, the Company employs
asset/liability management strategies in its attempt to minimize the effects of
economic cycles on its net interest income.




Inflation
and changing prices also have an impact on the growth of total assets in the
banking industry and the resulting need to increase capital at higher than
normal rates in order to maintain an appropriate equity to assets
ratio.  Changing prices will also affect trends in noninterest
operating expenses and noninterest income.






2008
Annual Report





Page
19




GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations


RESULTS
OF OPERATIONS


The
Company reported a net loss of $6,000 in 2008 compared with net income of
$658,000 in 2007. Earnings per share for 2008 were not meaningful compared to
$0.52 per share diluted during 2007.  The loss in 2008 was primarily
due to the recognition of a $1.3 million non-cash impairment charge against the
Company’s investment in two mutual funds held as
available-for-sale.  Earnings in 2007 included a reversal of $300,000
($198,000 after tax) of the loan loss reserves established in 2005 due to the
uncertainties in the loan portfolio subsequent to Hurricane
Katrina.





NET
INTEREST INCOME


The
Company’s net interest income increased $974,000, or 17.1%, in 2008 compared to
2007.  The increase was primarily due to a $28.8 million, or 17.4%,
increase in average interest earning assets. Net interest margin measures net
interest income as a percent of average interest-earning assets.  From
2007 to 2008, the Company’s net interest margin fell one basis point from 3.44%
to 3.43%. The decrease in net interest margin in 2008 was primarily due to a 40
basis point decline in the average yield on interest-earning assets. The
decrease in the yield on average interest-earning assets was attributable to the
decrease in market rates of interest which continued throughout
2008.  The decrease in the cost of funds was primarily driven by
higher-yielding certificates of deposit renewing into lower-yielding
certificates and the utilization of lower cost FHLB advances as a funding
source.




During
2008, loans constituted 73.0% of average interest-earning assets, up from 65.1%
in 2007. Mortgage-backed securities and collateralized mortgage obligations made
up 15.0% of average interest-earning assets during 2008, up from 13.0% in
2007.  Mutual fund investments, consisting primarily of investments in
funds secured by short-term mortgage instruments, were 2.5% of average
interest-earning assets in 2008, down from 4.1% in 2007.  A
substantial portion of the Company’s mutual fund investments have been
liquidated during the past three years to diversify the investment portfolio and
to fund loan growth.




The
Company’s funding mix improved during 2008 and had a positive impact on the net
interest margin.  The percentage of average interest-earning assets
funded by higher-cost sources of funds, such as certificates of deposit, was
49.1% in 2008 compared to 57.3% in 2007.  This is expected to further
improve in 2009 as the Bank continues to emphasize attracting lower-cost
transaction accounts.  During both 2008 and 2007, lower-cost
transaction accounts totaled 15.4% of average interest-earning
assets.  The improved deposit funding mix helped to decrease the cost
of funds, as the average cost of interest-bearing deposits decreased by 61 basis
points in 2008 compared to a 73 basis point increase in the average cost of
funds experienced during 2007.  The total average cost of
interest-bearing liabilities decreased by 58 basis points in 2008 compared to
2007, following a 58 basis point increase in 2007 compared to
2006.  The decrease in the cost of funds was reflective of the change
in market rates which steadily decreased throughout 2008.




2008
Annual Report





Page
20





GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
 Table
20 below sets forth, for the periods indicated, information regarding (i) the
total dollar amount of interest income from interest-earning assets and the
resulting average yields; (ii) the total dollar amount of interest expense on
interest-bearing liabilities and the resulting average rate; (iii) net interest
income; (iv) interest rate spread; and (v) net interest
margin.  Information is based on average daily balances during the
indicated periods.


TABLE
      20. SUMMARY OF AVERAGE BALANCES, NET INTEREST INCOME AND INTEREST
      RATESYear
      Ended December 31,
                  
                  2008
                  
                  
                  2007
                  
                  
                  2006($
      in thousands)
                  
                  Average
      Balance
                  
                  
                  Interest
                  
                  
                  Average
      Yield/ Cost
                  
                  
                  Average
      Balance
                  
                  
                  Interest
                  
                  
                  Average
      Yield/ Cost
                  
                  
                  Average
      Balance
                  
                  
                  Interest
                  
                  
                  Average
      Yield/ CostASSETSINTEREST-EARNING
      ASSETSLoans
                  
                  $
                  141,892
                  
                  
                  $
                  9,579
                  
                  
                  
                  6.75
                  %
                  
                  $
                  107,785
                  
                  
                  $
                  8,043
                  
                  
                  
                  7.46
                  %
                  
                  $
                  87,360
                  
                  
                  $
                  6,803
                  
                  
                  
                  7.79
                  %U.S.
      Treasury and Agency securities
                  
                  
                  15,110
                  
                  
                  
                  887
                  
                  
                  
                  5.87
                  %
                  
                  
                  22,103
                  
                  
                  
                  1,301
                  
                  
                  
                  5.89
                  %
                  
                  
                  16,916
                  
                  
                  
                  892
                  
                  
                  
                  5.27
                  %Mortgage-backed
      securities
                  
                  
                  16,416
                  
                  
                  
                  884
                  
                  
                  
                  5.38
                  %
                  
                  
                  5,704
                  
                  
                  
                  299
                  
                  
                  
                  5.24
                  %
                  
                  
                  2,502
                  
                  
                  
                  152
                  
                  
                  
                  6.08
                  %Collateralized
      mortgage obligations
                  
                  
                  12,689
                  
                  
                  
                  692
                  
                  
                  
                  5.45
                  %
                  
                  
                  15,794
                  
                  
                  
                  875
                  
                  
                  
                  5.54
                  %
                  
                  
                  19,383
                  
                  
                  
                  1,098
                  
                  
                  
                  5.66
                  %Mutual
      funds
                  
                  
                  4,898
                  
                  
                  
                  224
                  
                  
                  
                  4.57
                  %
                  
                  
                  6,851
                  
                  
                  
                  355
                  
                  
                  
                  5.18
                  %
                  
                  
                  29,668
                  
                  
                  
                  1,344
                  
                  
                  
                  4.53
                  %Total
      investment in securities
                  
                  
                  49,113
                  
                  
                  
                  2,687
                  
                  
                  
                  5.47
                  %
                  
                  
                  50,452
                  
                  
                  
                  2,830
                  
                  
                  
                  5.61
                  %
                  
                  
                  68,469
                  
                  
                  
                  3,486
                  
                  
                  
                  5.09
                  %FHLB
      stock
                  
                  
                  1,931
                  
                  
                  
                  44
                  
                  
                  
                  2.28
                  %
                  
                  
                  1,008
                  
                  
                  
                  53
                  
                  
                  
                  5.26
                  %
                  
                  
                  1,437
                  
                  
                  
                  74
                  
                  
                  
                  5.17
                  %Federal
      funds sold and demand deposits
                  
                  
                  1,520
                  
                  
                  
                  116
                  
                  
                  
                  7.63
                  %
                  
                  
                  6,410
                  
                  
                  
                  322
                  
                  
                  
                  5.02
                  %
                  
                  
                  13,069
                  
                  
                  
                  637
                  
                  
                  
                  4.88
                  %Total
      interest-earning assets
                  
                  
                  194,456
                  
                  
                  
                  12,426
                  
                  
                  
                  6.39
                  %
                  
                  
                  165,655
                  
                  
                  
                  11,248
                  
                  
                  
                  6.79
                  %
                  
                  
                  170,335
                  
                  
                  
                  11,000
                  
                  
                  
                  6.46
                  %NONINTEREST-EARNING
      ASSETSOther
      assets
                  
                  
                  16,660
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  10,523
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  8,942Allowance
      for loan losses
                  
                  
                  (3,115
                  )
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (3,580
                  )
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (5,207
                  )Total
      assets
                  
                  $
                  208,001
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  172,598
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  174,070LIABILITIES
      AND STOCKHOLDERS' EQUITYINTEREST-BEARING
      LIABILITIESNOW
      account deposits
                  
                  $
                  26,134
                  
                  
                  $
                  633
                  
                  
                  
                  2.42
                  %
                  
                  $
                  21,576
                  
                  
                  $
                  722
                  
                  
                  
                  3.35
                  %
                  
                  $
                  17,186
                  
                  
                  $
                  388
                  
                  
                  
                  2.26
                  %Savings
      deposits
                  
                  
                  17,074
                  
                  
                  
                  130
                  
                  
                  
                  0.76
                  %
                  
                  
                  20,511
                  
                  
                  
                  247
                  
                  
                  
                  1.20
                  %
                  
                  
                  27,103
                  
                  
                  
                  339
                  
                  
                  
                  1.25
                  %Time
      deposits
                  
                  
                  83,167
                  
                  
                  
                  3,218
                  
                  
                  
                  3.87
                  %
                  
                  
                  79,911
                  
                  
                  
                  3,617
                  
                  
                  
                  4.53
                  %
                  
                  
                  76,842
                  
                  
                  
                  2,938
                  
                  
                  
                  3.82
                  %Total
      interest-bearing deposits
                  
                  
                  126,375
                  
                  
                  
                  3,981
                  
                  
                  
                  3.15
                  %
                  
                  
                  121,998
                  
                  
                  
                  4,586
                  
                  
                  
                  3.76
                  %
                  
                  
                  121,131
                  
                  
                  
                  3,665
                  
                  
                  
                  3.03
                  %Borrowings
                  
                  
                  43,049
                  
                  
                  
                  1,770
                  
                  
                  
                  4.11
                  %
                  
                  
                  17,564
                  
                  
                  
                  961
                  
                  
                  
                  5.47
                  %
                  
                  
                  23,368
                  
                  
                  
                  1,239
                  
                  
                  
                  5.30
                  %Total
      interest-bearing liabilities
                  
                  
                  169,424
                  
                  
                  
                  5,751
                  
                  
                  
                  3.39
                  %
                  
                  
                  139,562
                  
                  
                  
                  5,547
                  
                  
                  
                  3.97
                  %
                  
                  
                  144,499
                  
                  
                  
                  4,904
                  
                  
                  
                  3.39
                  %NONINTEREST-BEARING
      LIABILITIES AND STOCKHOLDERS' EQUITYDemand
      deposits
                  
                  
                  8,915
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  4,380
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  2,367Other
      liabilities
                  
                  
                  1,845
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  1,230
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  1,195Shareholders'
      equity
                  
                  
                  27,817
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  27,426
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  26,009Total
      liabilities and stockholders' equity
                  
                  $
                  208,001
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  172,598
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  174,070Net
      interest income and margin
                  
                  
                  
                  
                  
                  $
                  6,675
                  
                  
                  
                  3.43
                  %
                  
                  
                  
                  
                  
                  $
                  5,701
                  
                  
                  
                  3.44
                  %
                  
                  
                  
                  
                  
                  $
                  6,096
                  
                  
                  
                  3.58
                  %Net
      interest-earning assets and spread
                  
                  $
                  25,032
                  
                  
                  
                  
                  
                  
                  
                  3.00
                  %
                  
                  $
                  26,093
                  
                  
                  
                  
                  
                  
                  
                  2.82
                  %
                  
                  $
                  25,836
                  
                  
                  
                  
                  
                  
                  
                  3.07
                  %Cost
      of funding interest-earning assets
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  2.96
                  %
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  3.35
                  %
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  2.88
                  %








2008
Annual Report




Page
21





GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations


Table
21 below sets forth the effects of changing rates and volumes on net interest
income of the Company.  Information is provided with respect to (i)
effects on interest income attributable to changes in volume (changes in volume
multiplied by prior rate) and (ii) effects on interest income attributable to
changes in rate (changes in rate multiplied by prior volume).  The
change in interest due to both volume and rate has been allocated
proportionately between volume and rate based on the absolute dollar amount of
the change in each.





TABLE
      21. SUMMARY OF CHANGES IN NET INTEREST INCOME2008
      Compared to 2007
                                                
                                                
                                                2007
      Compared to 2006Due
      to Change in
                                                
                                                
                                                Total
      Increase
                                                
                                                
                                                Due
      to Change in
                                                
                                                
                                                Total
      Increase($
      in thousands)
                                                
                                                Volume
                                                
                                                
                                                Rate
                                                
                                                
                                                (Decrease)
                                                
                                                
                                                Volume
                                                
                                                
                                                Rate
                                                
                                                
                                                (Decrease)INTEREST
      INCOMELoans
                                                
                                                $
                                                2,545
                                                
                                                
                                                $
                                                (1,009
                                                )
                                                
                                                $
                                                1,536
                                                
                                                
                                                $
                                                1,591
                                                
                                                
                                                $
                                                (351
                                                )
                                                
                                                $
                                                1,240U.S.
      Treasury and Agency securities
                                                
                                                
                                                (412
                                                )
                                                
                                                
                                                (2
                                                )
                                                
                                                
                                                (414
                                                )
                                                
                                                
                                                274
                                                
                                                
                                                
                                                135
                                                
                                                
                                                
                                                409Mortgage-backed
      securities
                                                
                                                
                                                562
                                                
                                                
                                                
                                                23
                                                
                                                
                                                
                                                585
                                                
                                                
                                                
                                                195
                                                
                                                
                                                
                                                (48
                                                )
                                                
                                                
                                                147Collateralized
      mortgage obligations
                                                
                                                
                                                (172
                                                )
                                                
                                                
                                                (11
                                                )
                                                
                                                
                                                (183
                                                )
                                                
                                                
                                                (203
                                                )
                                                
                                                
                                                (20
                                                )
                                                
                                                
                                                (223
                                                )Mutual
      funds
                                                
                                                
                                                (101
                                                )
                                                
                                                
                                                (30
                                                )
                                                
                                                
                                                (131
                                                )
                                                
                                                
                                                (1,034
                                                )
                                                
                                                
                                                45
                                                
                                                
                                                
                                                (989
                                                )Total
      investment in securities
                                                
                                                
                                                (123
                                                )
                                                
                                                
                                                (20
                                                )
                                                
                                                
                                                (143
                                                )
                                                
                                                
                                                (768
                                                )
                                                
                                                
                                                112
                                                
                                                
                                                
                                                (656
                                                )FHLB
      stock
                                                
                                                
                                                49
                                                
                                                
                                                
                                                (58
                                                )
                                                
                                                
                                                (9
                                                )
                                                
                                                
                                                (22
                                                )
                                                
                                                
                                                1
                                                
                                                
                                                
                                                (21
                                                )Federal
      funds sold and demand deposits
                                                
                                                
                                                (246
                                                )
                                                
                                                
                                                40
                                                
                                                
                                                
                                                (206
                                                )
                                                
                                                
                                                (325
                                                )
                                                
                                                
                                                10
                                                
                                                
                                                
                                                (315
                                                )Total
      interest income
                                                
                                                
                                                2,225
                                                
                                                
                                                
                                                (1,047
                                                )
                                                
                                                
                                                1,178
                                                
                                                
                                                
                                                476
                                                
                                                
                                                
                                                (228
                                                )
                                                
                                                
                                                248INTEREST
      EXPENSENOW
      account deposits
                                                
                                                
                                                153
                                                
                                                
                                                
                                                (242
                                                )
                                                
                                                
                                                (89
                                                )
                                                
                                                
                                                99
                                                
                                                
                                                
                                                235
                                                
                                                
                                                
                                                334Savings
      deposits
                                                
                                                
                                                (41
                                                )
                                                
                                                
                                                (76
                                                )
                                                
                                                
                                                (117
                                                )
                                                
                                                
                                                (82
                                                )
                                                
                                                
                                                (10
                                                )
                                                
                                                
                                                (92
                                                )Time
      deposits
                                                
                                                
                                                147
                                                
                                                
                                                
                                                (546
                                                )
                                                
                                                
                                                (399
                                                )
                                                
                                                
                                                117
                                                
                                                
                                                
                                                562
                                                
                                                
                                                
                                                679Total
      interest-bearing deposits
                                                
                                                
                                                259
                                                
                                                
                                                
                                                (864
                                                )
                                                
                                                
                                                (605
                                                )
                                                
                                                
                                                134
                                                
                                                
                                                
                                                787
                                                
                                                
                                                
                                                921Borrowings
                                                
                                                
                                                1,394
                                                
                                                
                                                
                                                (585
                                                )
                                                
                                                
                                                809
                                                
                                                
                                                
                                                (308
                                                )
                                                
                                                
                                                30
                                                
                                                
                                                
                                                (278
                                                )Total
      interest expense
                                                
                                                
                                                1,653
                                                
                                                
                                                
                                                (1,449
                                                )
                                                
                                                
                                                204
                                                
                                                
                                                
                                                (174
                                                )
                                                
                                                
                                                817
                                                
                                                
                                                
                                                643Change
      in net interest income
                                                
                                                $
                                                572
                                                
                                                
                                                $
                                                402
                                                
                                                
                                                $
                                                974
                                                
                                                
                                                $
                                                650
                                                
                                                
                                                $
                                                (1,045
                                                )
                                                
                                                $
                                                (395
                                                )






PROVISION
FOR LOAN LOSSES


The
Company recorded a provision for loan losses of $4.8 million in 2005, subsequent
to Hurricane Katrina, as the hurricane severely impacted the entire area in
which the Company does business.  As previously discussed under “Loans
and Allowance for Loan Losses,” the provision for loan losses for the year ended
December 31, 2005 was based on the information available to management at the
time.  Considerable uncertainties were outstanding regarding, among
other things, the extent of any economic recovery in the greater New Orleans
area and the ultimate disposition of property insurance claims.




In
2007, the Company reversed $300,000 of the provision that was taken in
2005.  No reversal or provision was made in 2008. The area remains in
a state of uncertainty regarding the level of recovery from Hurricane Katrina,
but borrower performance and insurance claims were better in 2007 than
management’s expectations, hence the reduction in the level of impairment in the
loan portfolio.  The Bank’s asset quality committee will continue to
meet quarterly and address all potentially impaired loans and adjust the
allowance for loan losses accordingly based on the information available at the
time.




For
a more detailed discussion of the changes in the allowance for loan losses,
non-performing assets, and general credit quality, see the earlier section on
Loans and Allowance for Loan Losses.  The future level of the
allowance and provisions for loan losses will reflect management’s ongoing
evaluation of credit risk, based on established internal policies and
practices.






2008
Annual Report





Page
22




GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations


NON-INTEREST
INCOME


Total
non-interest (loss) income decreased $1.4 million from $424,000 in 2007 to a
$994,000 loss in 2008.  In 2007, the Bank recorded miscellaneous
income due to a non-recurring gain of $110,000 on a processing error by a third
party vendor which was subsequently reversed against miscellaneous income in
2008 when this error was corrected.  This was partially offset by an
$88,000 increase in income from gains realized on the sale of mortgage loans in
the secondary market which increased from $189,000 in 2007 to $277,000 in
2008.




Income
from real estate held for investment was $56,000 and $52,000 in 2008 and 2007,
respectively.  This income is for rent received by the Company on
property not used in its banking operations.




Service
charges on deposit accounts were $34,000 in 2008, up from $25,000 in
2007.  The Company continues to develop new deposit products and
pricing strategies to increase transaction accounts and the related fee
income.  Table 22 shows the components of non-interest income for each
year in the three-year period ended December 31, 2008.




As
previously discussed in “Investment in Securities,” the Company recorded an
other-than-temporary impairment of $1.3 million on its investment in mutual
funds in 2008. In addition, the Company redeemed for cash a total of $1.1
million of the holding in these funds and realized losses of $77,000 during
2008. There was no impairment charge recognized on these mutual funds during
2007.





TABLE
      22. NON-INTEREST INCOME($
      in thousands)
                  
                  2008
                  
                  
                  2007
                  
                  
                  2006Service
      charges on deposit accounts
                  
                  $
                  34
                  
                  
                  $
                  25
                  
                  
                  $
                  19ATM
      fees
                  
                  
                  16
                  
                  
                  
                  9
                  
                  
                  
                  4Early
      closing penalties
                  
                  
                  7
                  
                  
                  
                  34
                  
                  
                  
                  21Income
      from real estate held for investment
                  
                  
                  56
                  
                  
                  
                  52
                  
                  
                  
                  52Gain
      on sales of mortgage loans
                  
                  
                  277
                  
                  
                  
                  189
                  
                  
                  
                  30Gain
      on sales and income from foreclosed assets
                  
                  
                  4
                  
                  
                  
                  -
                  
                  
                  
                  -Gain
      on Disposal of Premises & Equipment
                  
                  
                  17
                  
                  
                  
                  -
                  
                  
                  
                  -Miscellaneous
                  
                  
                  (50
                  )
                  
                  
                  115
                  
                  
                  
                  15Total
      noninterest income before securities transactions
                  
                  $
                  361
                  
                  
                  $
                  424
                  
                  
                  $
                  141Net
      (loss)/gain on securities transactions
                  
                  
                  (1,355
                  )
                  
                  
                  -
                  
                  
                  
                  (90
                  )Total
      noninterest income (loss)
                  
                  $
                  (994
                  )
                  
                  $
                  424
                  
                  
                  $
                  51








NON-INTEREST
EXPENSE


Table
23shows the
components of non-interest expense for each year of the three-year period ended
December 31, 2008.  Non-interest expense increased $264,000, or 4.9%,
in 2008 after a $483,000, or 9.8%, increase in 2007.








2008
Annual Report





Page
23




GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations




TABLE
      23. NON-INTEREST EXPENSE($
      in thousands)
                  
                  2008
                  
                  
                  2007
                  
                  
                  2006Employee
      compensation
                  
                  $
                  2,610
                  
                  
                  $
                  2,518
                  
                  
                  $
                  2,282Employee
      benefits
                  
                  
                  755
                  
                  
                  
                  742
                  
                  
                  
                  958Total
      personnel expense
                  
                  
                  3,365
                  
                  
                  
                  3,260
                  
                  
                  
                  3,240Net
      occupancy expense
                  
                  
                  792
                  
                  
                  
                  673
                  
                  
                  
                  542Ad
      Valorem taxes
                  
                  
                  191
                  
                  
                  
                  258
                  
                  
                  
                  194Data
      processing costs
                  
                  
                  340
                  
                  
                  
                  301
                  
                  
                  
                  241Advertising
                  
                  
                  51
                  
                  
                  
                  139
                  
                  
                  
                  40ATM
      expenses
                  
                  
                  37
                  
                  
                  
                  39
                  
                  
                  
                  24Professional
      fees
                  
                  
                  259
                  
                  
                  
                  188
                  
                  
                  
                  173Deposit
      insurance and supervisory fees
                  
                  
                  151
                  
                  
                  
                  106
                  
                  
                  
                  103Printing
      and office supplies
                  
                  
                  102
                  
                  
                  
                  113
                  
                  
                  
                  119Telephone
                  
                  
                  84
                  
                  
                  
                  66
                  
                  
                  
                  51Other
      operating expenses
                  
                  
                  301
                  
                  
                  
                  266
                  
                  
                  
                  199Total
      non-interest expense
                  
                  $
                  5,673
                  
                  
                  $
                  5,409
                  
                  
                  $
                  4,926Efficiency
      Ratio
                  
                  
                  99.86
                  %
                  
                  
                  88.27
                  %
                  
                  
                  80.14
                  %








Total
personnel costs increased $105,000, or 3.2%, in 2008 compared to 2007, primarily
due to the additional employees at our new banking locations which were opened
in the latter half of 2007. In 2008 and 2007, the Company provided full health
insurance benefits to its employees and partial benefits to dependents of
employees.  Employee health insurance costs were $337,000 in 2008, an
increase of $52,000, or 18.2% from 2007.  The increase in health
insurance costs from 2007 to 2008 was primarily due to the increase in the
number of employees and an increase in the cost of health insurance
premiums.




Effective
January 1, 2007, the Company established a new 401(k) plan that included the
participant ESOP balances from the existing ESOP plan that was discontinued in
2006.  In 2008 and 2007, the Company recognized expense relating to
its 401(k) plan of $156,000 and $90,000, respectively.




Advertising
costs in 2008 decreased by $88,000, or 63.3%, compared with 2007, primarily due
to the advertising efforts in 2007 which were focused on promoting the Bank’s
new products and announcing its re-opened Mid-City New Orleans location, the new
Westbank location, and the conversion of the Ponchatoula location to a
full-service branch.




Occupancy
expenses, net, increased $119,000, or 17.7%, from 2007 to 2008, primarily due to
incurring a full year of operating costs on locations which were opened
primarily in the latter half of 2007.




Professional
fees were $188,000 in 2007 and $259,000 in 2008, which represents an increase of
$71,000, or 37.8%. The increase in professional fees was primarily due to the
legal costs associated with the conversion of the Bank from a Louisiana
chartered savings bank to a Federally chartered savings bank. In 2008, the Bank
increased its utilization of the services of attorneys to assist with loan
collection activity and various consultants to provide assessments of its
internal processes and procedures.





INCOME
TAXES


Income
tax expense was $14,000 in 2008 compared with $358,000 in 2007.  The
Company’s effective tax rate in 2008 was negatively impacted by the losses
relating to the write-down of securities as an other-than-temporary impairment,
which is classified as a capital loss for tax purposes. In 2007, the Company’s
effective tax rate approximated the 34% statutory rate. As there was and remains
uncertainty whether the Company can generate sufficient capital gains to offset
the impairment losses recorded on the investments in mutual funds, a valuation
allowance against the Bank’s deferred tax asset has been
established.  See Note I to the financial statements for additional
information on the Company’s effective tax rates and the composition of changes
in income tax expense for all periods.








2008
Annual Report





Page
24




GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations


CONTRACTUAL
OBLIGATIONS


The
following table summarizes payments due from the Company under specified
long-term and certain other contractual obligations as of December 31,
2008.  The Company leases one banking location from a third-party and
it leases a temporary facility, including both the trailer and banking
equipment, placed on Company-owned property.  The lease of the banking
location expired in 2008 and has been renewed on consecutive terms of six
months. The lease of the temporary facility and the related banking equipment
expired in 2008 and has been renewed on a month-to-month
basis.  Obligations under deposit contracts are not
included.  The scheduled maturities of time deposits are reflected in
table 13 above in the section on “Deposits”.





TABLE
      24. CONTRACTUAL OBLIGATIONS($
      in thousands)
                      
                      Payments
      Due By Period From December 31, 2008Total
                      
                      
                      Less
      Than
      1 Year
                      
                      
                      1-3
      Years
                      
                      
                      3-5
      Years
                      
                      
                      More
      Than
      5 YearsFederal
      Home Loan Bank advances
                      
                      $
                      52,002
                      
                      
                      $
                      13,174
                      
                      
                      $
                      28,161
                      
                      
                      $
                      10,667
                      
                      
                      $
                      -Operating
      leases on banking facilities
                      
                      
                      7
                      
                      
                      
                      7
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Total
      obligations
                      
                      $
                      52,009
                      
                      
                      $
                      13,181
                      
                      
                      $
                      28,161
                      
                      
                      $
                      10,667
                      
                      
                      $
                      -








OFF-BALANCE
SHEET OBLIGATIONS


The
Company is a party to financial instruments with off-balance sheet risk in the
normal course of business in order to meet the financing needs of its
customers.  These financial instruments include mortgage and
construction loan commitments, letters of credit and commercial lines of
credit.  Those instruments involve, to varying degrees, elements of
credit risk in excess of the amount recognized in the balance
sheet.  The Company’s exposure to credit loss in the event of
non-performance by the other party to the financial instrument is represented by
the contractual notional amount of those instruments.  The Company
uses the same credit policies in making commitments and conditional obligations
as it does for on-balance sheet instruments.








2008
Annual Report





Page
25




GS
      Financial Corp. and SubsidiaryManagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations


The
Company’s contingent liabilities and commitments as of December 31, 2008 are as
follows:





TABLE
      25. OFF-BALANCE SHEET OBLIGATIONS($
      in thousands)
                    
                    Commitments
      Due By Period From December 31, 2008Total
                    
                    
                    Less
      Than
      1 Year
                    
                    
                    1
      to 3 Years
                    
                    
                    3
      to 5 Years
                    
                    
                    More
      Than 5 YearsMortgage
      loan commitments
                    
                    $
                    8,472
                    
                    
                    $
                    8,472
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -Construction
      loan commitments
                    
                    
                    4,178
                    
                    
                    
                    4,178
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Unused
      portions of lines of credit
                    
                    
                    4,600
                    
                    
                    
                    4,600
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Commercial
      loan commitments
                    
                    
                    1,827
                    
                    
                    
                    1,827
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Consumer
      loan commitments
                    
                    
                    13
                    
                    
                    
                    13
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Total
      Obligations
                    
                    $
                    19,090
                    
                    
                    $
                    19,090
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -








Management’s Report On Internal
      Control Over Financial
Reporting





Management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act
Rule 13a-15(f).  The Company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the Company;
(ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the Company are being made only in accordance with authorizations of management
and directors of the Company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the Company’s assets that could have a material effect on the
financial statements.




Internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements prepared for external purposes in accordance with generally
accepted accounting principles. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements.  Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.




Under
the supervision and with the participation of management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting
based on the framework in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on
our evaluation under the framework in Internal Control — Integrated
Framework, management concluded that our internal control over financial
reporting was effective as of December 31, 2008.




This
Annual Report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only management’s report
in this Annual Report.






2008
Annual Report





Page
26







To
the Board of Directors


GS
Financial Corp. and Subsidiary


Metairie,
Louisiana





Report of Independent
Registered Public Accounting Firm





We have audited the accompanying consolidated
balance sheets of GS FINANCIAL CORP.and its wholly-owned subsidiary, Guaranty Savings
Bank, as of December 31, 2008 and 2007, and the related consolidated statements
of income (loss), comprehensive income (loss), changes in stockholders’ equity,
and cash flows for each of the three years in the period ended December 31,
2008.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.




We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.




In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the
consolidated financial position of GS FINANCIAL CORP.and its wholly-owned
subsidiary,Guaranty Savings Bank,
as of December 31, 2008 and 2007, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2008, in conformity with accounting principles generally accepted
in the United States of America.




We
were not engaged to examine management’s assessment of the effectiveness of GS
Financial Corp. and Subsidiary’s internal control over financial reporting as of
December 31, 2008, included in the Company’s 10-K filing with the Securities and
Exchange Commission. Accordingly, we do not express an opinion
thereon.









A
Professional Accounting Corporation




Metairie,
Louisiana


March
18, 2009






2008
Annual Report




Page
27





GS
      FINANCIAL CORP. AND SUBSIDIARYCONSOLIDATED
      BALANCE SHEETSASSETSDecember
      31,2008
                  
                  
                  2007(In
      Thousands)Cash
      and Cash EquivalentsCash
      and Amounts Due from Depository Institutions
                  
                  $
                  2,313
                  
                  
                  $
                  2,485Interest-Bearing
      Deposits in Other Banks
                  
                  
                  569
                  
                  
                  
                  6,008Federal
      Funds Sold
                  
                  
                  323
                  
                  
                  
                  969Total
      Cash and Cash Equivalents
                  
                  
                  3,205
                  
                  
                  
                  9,462Securities
      Available-for-Sale, at Fair Value
                  
                  
                  47,617
                  
                  
                  
                  47,747Loans,
      Net of Allowance for Loan Losses of $2,719 and $3,432,
      Respectively
                  
                  
                  158,523
                  
                  
                  
                  118,477Accrued
      Interest Receivable
                  
                  
                  1,612
                  
                  
                  
                  1,828Other
      Real Estate
                  
                  
                  461
                  
                  
                  
                  -Premises
      and Equipment, Net
                  
                  
                  5,756
                  
                  
                  
                  5,874Stock
      in Federal Home Loan Bank, at Cost
                  
                  
                  2,300
                  
                  
                  
                  1,220Real
      Estate Held-for-Investment, Net
                  
                  
                  436
                  
                  
                  
                  450Other
      Assets
                  
                  
                  1,960
                  
                  
                  
                  1,429Total
      Assets
                  
                  $
                  221,870
                  
                  
                  $
                  186,487








The
accompanying notes are an integral part of these financial
statements.






2008
Annual Report




Page
28




GS FINANCIAL CORP. AND SUBSIDIARYCONSOLIDATED
      BALANCE SHEETSLIABILITIES
      AND STOCKHOLDERS' EQUITYDecember
      31,2008
                
                
                2007(In
      Thousands)LIABILITIESDepositsNoninterest-bearing
                
                $
                7,970
                
                
                $
                5,685Interest-bearing
                
                
                132,145
                
                
                
                123,825Total
      Deposits
                
                
                140,115
                
                
                
                129,510Advance
      Payments by Borrowers for Taxes and Insurance
                
                
                167
                
                
                
                335FHLB
      Advances
                
                
                52,002
                
                
                
                26,986Other
      Liabilities
                
                
                2,028
                
                
                
                1,492Total
      Liabilities
                
                
                194,312
                
                
                
                158,323STOCKHOLDERS'
      EQUITYPreferred
      Stock - $.01 Par Value; 5,000,000 Shares Authorized, None
      Issued
                
                
                -
                
                
                
                -Common
      Stock - $.01 Par Value; 20,000,000 Shares Authorized 3,438,500 Shares
      Issued
                
                
                34
                
                
                
                34Additional
      Paid-In Capital
                
                
                34,546
                
                
                
                34,546Unearned
      RRP Trust Stock
                
                
                (143
                )
                
                
                (158
                )Treasury
      Stock (2,152,700 Shares in 2008, and 2,152,700 Shares in 2007) at
      Cost
                
                
                (32,062
                )
                
                
                (32,062
                )Retained
      Earnings
                
                
                25,404
                
                
                
                25,919Accumulated
      Other Comprehensive Loss
                
                
                (221
                )
                
                
                (115
                )Total
      Stockholders' Equity
                
                
                27,558
                
                
                
                28,164Total
      Liabilities and Stockholders' Equity
                
                $
                221,870
                
                
                $
                186,487








The
accompanying notes are an integral part of these financial
statements.






2008
Annual Report





Page
29




GS
      FINANCIAL CORP. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF (LOSS) INCOMEFor
      the Years EndedDecember 31,2008
                    
                    
                    2007
                    
                    
                    2006(In
      Thousands, Except Per Share Data)INTEREST
      AND DIVIDED INCOMELoans,
      Including Fees
                    
                    $
                    9,579
                    
                    
                    $
                    8,043
                    
                    
                    $
                    6,803Investment
      Securities
                    
                    
                    2,687
                    
                    
                    
                    2,830
                    
                    
                    
                    3,485Other
      Interest Income
                    
                    
                    160
                    
                    
                    
                    375
                    
                    
                    
                    712Total
      Interest Income
                    
                    
                    12,426
                    
                    
                    
                    11,248
                    
                    
                    
                    11,000INTEREST
      EXPENSEDeposits
                    
                    
                    3,981
                    
                    
                    
                    4,586
                    
                    
                    
                    3,665Advances
      from Federal Home Loan Bank
                    
                    
                    1,770
                    
                    
                    
                    961
                    
                    
                    
                    1,239Total
      Interest Expense
                    
                    
                    5,751
                    
                    
                    
                    5,547
                    
                    
                    
                    4,904NET
      INTEREST INCOME
                    
                    
                    6,675
                    
                    
                    
                    5,701
                    
                    
                    
                    6,096PROVISION
      (REVERSAL) FOR LOAN LOSSES
                    
                    
                    -
                    
                    
                    
                    (300
                    )
                    
                    
                    (1,981
                    )NET
      INTEREST INCOME AFTER PROVISION(REVERSAL) FOR LOAN
      LOSSES
                    
                    
                    6,675
                    
                    
                    
                    6,001
                    
                    
                    
                    8,077NON-INTEREST
      (LOSS) INCOMELoss
      on Securities
                    
                    
                    (1,355
                    )
                    
                    
                    -
                    
                    
                    
                    (90
                    )Gain
      on Sale of Loans
                    
                    
                    277
                    
                    
                    
                    189
                    
                    
                    
                    30Customer
      Service Fees
                    
                    
                    -
                    
                    
                    
                    68
                    
                    
                    
                    44Other
      Income
                    
                    
                    84
                    
                    
                    
                    167
                    
                    
                    
                    67Total
      Non-Interest (Loss) Income
                    
                    
                    (994
                    )
                    
                    
                    424
                    
                    
                    
                    51NON-INTEREST
      EXPENSESalaries
      and Employee Benefits
                    
                    
                    3,365
                    
                    
                    
                    3,260
                    
                    
                    
                    3,240Occupancy
      Expense
                    
                    
                    792
                    
                    
                    
                    673
                    
                    
                    
                    542Ad
      Valorem Taxes
                    
                    
                    191
                    
                    
                    
                    258
                    
                    
                    
                    194Other
      Expenses
                    
                    
                    1,325
                    
                    
                    
                    1,218
                    
                    
                    
                    950Total
      Non-Interest Expense
                    
                    
                    5,673
                    
                    
                    
                    5,409
                    
                    
                    
                    4,926INCOME  BEFORE
      INCOME TAX EXPENSE
                    
                    
                    8
                    
                    
                    
                    1,016
                    
                    
                    
                    3,202INCOME
      TAX EXPENSE
                    
                    
                    14
                    
                    
                    
                    358
                    
                    
                    
                    1,088NET
      (LOSS) INCOME
                    
                    $
                    (6
                    )
                    
                    $
                    658
                    
                    
                    $
                    2,114(LOSS)
      EARNINGS PER SHARE - BASIC
                    
                    
                    n/m
                    
                    
                    $
                    0.53
                    
                    
                    $
                    1.74(LOSS)
      EARNINGS PER SHARE - DILUTED
                    
                    
                    n/m
                    
                    
                    $
                    0.52
                    
                    
                    $
                    1.73








The
accompanying notes are an integral part of these financial
statements.






2008
Annual Report





Page
30








GS
      FINANCIAL CORP. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF COMPREHENSIVE (LOSS) INCOMEFor
      the Years EndedDecember
      31,2008
                
                
                2007
                
                
                2006(In
      Thousands)NET
      (LOSS) INCOME
                
                $
                (6
                )
                
                $
                658
                
                
                $
                2,114OTHER
      COMPREHENSIVE (LOSS) INCOME, NET OF TAXUnrealized
      Holding (Losses) Gains Arising During the Period
                
                
                (1,000
                )
                
                
                247
                
                
                
                (150
                )Reclassification
      Adjustment for Losses (Gains)Included in Net Income
                
                
                894
                
                
                
                (43
                )
                
                
                29Total
      Other Comprehensive (Loss) Income
                
                
                (106
                )
                
                
                204
                
                
                
                (121
                )COMPREHENSIVE
      (LOSS) INCOME
                
                $
                (112
                )
                
                $
                862
                
                
                $
                1,993








The
accompanying notes are an integral part of these financial
statements.






2008
Annual Report




Page
31




GS
      FINANCIAL CORP. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITYFor
      the Years Ended December 31, 2008, 2007, and 2006Common
      Stock
                  
                  
                  Additional
      Paid -In Capital
                  
                  
                  Treasury
      Stock
                  
                  
                  Unearned
      ESOP Stock
                  
                  
                  Unearned
      RRP Trust Stock
                  
                  
                  Retained
      Earnings
                  
                  
                  Accumulated
      Other Comprehensive Income (Loss)
                  
                  
                  Total
      Stockholders' Equity(In
      Thousands)BALANCES
      AT JANUARY 1, 2006
                  
                  $
                  34
                  
                  
                  $
                  34,565
                  
                  
                  $
                  (32,193
                  )
                  
                  $
                  (239
                  )
                  
                  $
                  (698
                  )
                  
                  $
                  24,136
                  
                  
                  $
                  (198
                  )
                  
                  $
                  25,407Distribution
      of RRP Trust Stock
                  
                  
                  -
                  
                  
                  
                  (50
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  175
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  125ESOP
      Compensation Earned
                  
                  
                  -
                  
                  
                  
                  186
                  
                  
                  
                  -
                  
                  
                  
                  239
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  425Purchase
      of Treasury Stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (300
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (300
                  )Dividends
      Declared
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (486
                  )
                  
                  
                  -
                  
                  
                  
                  (486
                  )Net
      Income - Year Ended December 31, 2006
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,114
                  
                  
                  
                  -
                  
                  
                  
                  2,114Other
      Comprehensive Loss, Net of ApplicableDeferred
      Income Taxes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (121
                  )
                  
                  
                  (121
                  )BALANCES
      AT DECEMBER 31, 2006
                  
                  
                  34
                  
                  
                  
                  34,701
                  
                  
                  
                  (32,493
                  )
                  
                  
                  -
                  
                  
                  
                  (523
                  )
                  
                  
                  25,764
                  
                  
                  
                  (319
                  )
                  
                  
                  27,164Distribution
      of RRP Trust Stock
                  
                  
                  -
                  
                  
                  
                  (52
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  177
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  125Retirement
      of RRP Trust Stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (188
                  )
                  
                  
                  -
                  
                  
                  
                  188
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Exercise
      of Stock Option
                  
                  
                  -
                  
                  
                  
                  (103
                  )
                  
                  
                  619
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  516Dividends
      Declared
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (503
                  )
                  
                  
                  -
                  
                  
                  
                  (503
                  )Net
      Income - Year Ended December 31, 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  658
                  
                  
                  
                  -
                  
                  
                  
                  658Other
      Comprehensive Income, Net of ApplicableDeferred
      Income Taxes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  204
                  
                  
                  
                  204BALANCES
      AT DECEMBER 31, 2007
                  
                  
                  34
                  
                  
                  
                  34,546
                  
                  
                  
                  (32,062
                  )
                  
                  
                  -
                  
                  
                  
                  (158
                  )
                  
                  
                  25,919
                  
                  
                  
                  (115
                  )
                  
                  
                  28,164Distribution
      of RRP Trust Stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  15
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  15Dividends
      Declared
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (509
                  )
                  
                  
                  -
                  
                  
                  
                  (509
                  )Net
      Loss - Year Ended December 31, 2008
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (6
                  )
                  
                  
                  -
                  
                  
                  
                  (6
                  )Other
      Comprehensive Loss, Net of ApplicableDeferred
      Income Taxes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (106
                  )
                  
                  
                  (106
                  )BALANCES
      AT DECEMBER 31, 2008
                  
                  $
                  34
                  
                  
                  $
                  34,546
                  
                  
                  $
                  (32,062
                  )
                  
                  $
                  -
                  
                  
                  $
                  (143
                  )
                  
                  $
                  25,404
                  
                  
                  $
                  (221
                  )
                  
                  $
                  27,558








The
accompanying notes are an integral part of these financial
statements.






2008
Annual Report








Page
32





GS
      FINANCIAL CORP. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF CASH FLOWSFor
      the Years EndedDecember 31,2008
                      
                      
                      2007
                      
                      
                      2006(In
      Thousands)CASH FLOWS FROM OPERATING
      ACTIVITIES:Net
      (Loss) Income
                      
                      $
                      (6
                      )
                      
                      $
                      658
                      
                      
                      $
                      2,114Adjustments
      to Reconcile Net (Loss) Income to Net Cash Provided by Operating
      Activities:Depreciation
      and Amortization
                      
                      
                      284
                      
                      
                      
                      229
                      
                      
                      
                      172Premium
      Amortization (Discount Accretion), Net
                      
                      
                      6
                      
                      
                      
                      (26
                      )
                      
                      
                      (45
                      )Provision
      (Reversal) for Loan Losses
                      
                      
                      -
                      
                      
                      
                      (300
                      )
                      
                      
                      (1,981
                      )Non-Cash
      Dividend - FHLB Stock
                      
                      
                      (43
                      )
                      
                      
                      (53
                      )
                      
                      
                      (74
                      )Mutual
      Fund Dividends Reinvested
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (517
                      )ESOP
      Expense
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      408RRP
      Expense
                      
                      
                      15
                      
                      
                      
                      111
                      
                      
                      
                      143Gain
      on Sale of Loans
                      
                      
                      (277
                      )
                      
                      
                      (189
                      )
                      
                      
                      (30
                      )Gain
      on Sale of Other Real Estate
                      
                      
                      (4
                      )
                      
                      
                      -
                      
                      
                      
                      -Loss
      on Sale of Investments
                      
                      
                      74
                      
                      
                      
                      -
                      
                      
                      
                      90Loss
      on Write-Down of Investments
                      
                      
                      1,281
                      
                      
                      
                      -
                      
                      
                      
                      -Deferred
      Income Tax (Benefit) Expense
                      
                      
                      (103
                      )
                      
                      
                      970
                      
                      
                      
                      325Changes
      in Operating Assets and Liabilities:Accrued
      Interest Receivable and Other Assets
                      
                      
                      4
                      
                      
                      
                      (95
                      )
                      
                      
                      74Accrued
      Interest Payable and Other Liabilities
                      
                      
                      320
                      
                      
                      
                      (649
                      )
                      
                      
                      270Net
      Cash Provided by Operating Activities
                      
                      
                      1,551
                      
                      
                      
                      656
                      
                      
                      
                      949CASH FLOWS FROM INVESTING
      ACTIVITIES:Proceeds
      from Maturities of Investment Securities
                      
                      
                      16,838
                      
                      
                      
                      14,119
                      
                      
                      
                      6,117Proceeds
      from Sales of Investment Securities
                      
                      
                      5,003
                      
                      
                      
                      -
                      
                      
                      
                      14,963Purchases
      of Investment Securities
                      
                      
                      (24,262
                      )
                      
                      
                      (11,546
                      )
                      
                      
                      (37,543
                      )Redemption
      of Mutual Funds, Net
                      
                      
                      1,084
                      
                      
                      
                      5,000
                      
                      
                      
                      38,961Loan
      Originations and Principal Collections, Net
                      
                      
                      (60,619
                      )
                      
                      
                      (39,183
                      )
                      
                      
                      (23,636
                      )Proceeds
      from Sales of Loans
                      
                      
                      19,723
                      
                      
                      
                      15,182
                      
                      
                      
                      1,353Purchases
      of Premises and Equipment
                      
                      
                      (152
                      )
                      
                      
                      (2,511
                      )
                      
                      
                      (1,480
                      )Proceeds
      from Sales of Other Real Estate
                      
                      
                      670
                      
                      
                      
                      -
                      
                      
                      
                      -(Purchase)
      Redemption of Federal Home Loan Bank Stock
                      
                      
                      (1,037
                      )
                      
                      
                      (185
                      )
                      
                      
                      925Net
      Cash Used in Investing Activities
                      
                      
                      (42,752
                      )
                      
                      
                      (19,124
                      )
                      
                      
                      (340
                      )








The
accompanying notes are an integral part of these financial
statements.




2008
Annual Report




Page
33





GS
      FINANCIAL CORP. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF CASH FLOWSFor
      the Years EndedDecember
      31,2008
                  
                  
                  2007
                  
                  
                  2006(In
      Thousands)CASH FLOWS FROM FINANCING
      ACTIVITIES:Purchase
      of Treasury Stock
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  (300
                  )Proceeds
      from Stock Option Exercise
                  
                  
                  -
                  
                  
                  
                  516
                  
                  
                  
                  -Increase
      (Decrease) in Federal Home Loan Bank Advances
                  
                  
                  25,016
                  
                  
                  
                  9,944
                  
                  
                  
                  (15,064
                  )Payment
      of Cash Stock Dividends
                  
                  
                  (509
                  )
                  
                  
                  (503
                  )
                  
                  
                  (486
                  )Increase
      in Deposits
                  
                  
                  10,605
                  
                  
                  
                  6,756
                  
                  
                  
                  3,888(Decrease)
      Increase in Deposit for Escrows
                  
                  
                  (168
                  )
                  
                  
                  100
                  
                  
                  
                  (85
                  )Net
      Cash Provided by (Used in) Financing Activities
                  
                  
                  34,944
                  
                  
                  
                  16,813
                  
                  
                  
                  (12,047
                  )NET
      (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
                  
                  
                  (6,257
                  )
                  
                  
                  (1,655
                  )
                  
                  
                  (11,438
                  )CASH
      AND CASH EQUIVALENTS, BEGINNING OF YEAR
                  
                  
                  9,462
                  
                  
                  
                  11,117
                  
                  
                  
                  22,555CASH
      AND CASH EQUIVALENTS, END OF YEAR
                  
                  $
                  3,205
                  
                  
                  $
                  9,462
                  
                  
                  $
                  11,117SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATIONCash
      Paid During the Year for:Interest
                  
                  $
                  5,690
                  
                  
                  $
                  5,524
                  
                  
                  $
                  5,014Income
      Taxes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Loans
      Transferred to Other Real Estate During the Year
                  
                  
                  1,472
                  
                  
                  
                  -
                  
                  
                  
                  -Market
      Value Adjustment for (Loss) Gain on Securities
      Available-for-Sale
                  
                  
                  (160
                  )
                  
                  
                  244
                  
                  
                  
                  (183
                  )








The
accompanying notes are an integral part of these financial
statements.




2008
Annual Report




Page
34




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial
Statements




NOTE
A


SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





NATURE
OF OPERATIONS


GS FINANCIAL CORP. (“Company”)
was organized as a Louisiana corporation on December 24, 1996, for the purpose
of becoming the holding company of Guaranty Savings and Homestead Association
(“Association”) in anticipation of converting the Association from a Louisiana
chartered mutual savings and loan association to a Louisiana chartered stock
savings and loan association.  In June 2006, the Association changed
its name to Guaranty Savings Bank (Bank).  The Bank operates in the
banking/savings and loan industry and, as such, provides financial services to
individuals, corporate entities, and other organizations through the origination
of loans and the acceptance of deposits in the form of savings accounts,
certificates of deposit, money market accounts, and demand deposit
accounts.





The Bank
is subject to competition from other financial institutions and is subject to
the regulations of Federal agencies.  The Bank undergoes periodic
examinations by those regulatory authorities.





BASIS
OF PRESENTATION AND CONSOLIDATION


The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiary, Guaranty Savings Bank.  All significant
inter-company balances and transactions have been eliminated in
consolidation.





USE
OF ESTIMATES


In
preparing consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the balance sheets and reported amounts
of revenues and expenses during the reporting period.  Actual results
could differ from those estimates.  Material estimates that are
particularly susceptible to significant change relate to the determination of
the allowance for losses on loans and valuation of foreclosed real
estate.





SIGNIFICANT
GROUP CONCENTRATIONS OF CREDIT RISK


Most of
the Company’s activities are with customers located within the greater New
Orleans area in Louisiana.  Note B discusses the types of securities
in which the Company invests.  Note C discusses the types of lending
in which the Company engages.  The Company does not have any
significant concentrations in any one industry or to any one
customer.





CASH
AND CASH EQUIVALENTS


For the
purposes of the Consolidated Statements of Cash Flows, cash and cash equivalents
include cash and balances due from banks, federal funds sold, and securities
purchased under agreements to resell, all of which mature within ninety
days.





SECURITIES
AVAILABLE-FOR-SALE


Marketable
securities are classified as “available-for-sale” and recorded at fair value,
with unrealized gains and losses excluded from earnings and reported in other
comprehensive income.








2008
Annual Report




Page
35




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
A


SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





SECURITIES
AVAILABLE-FOR-SALE (Continued)


Mortgage-backed
securities represent participating interests in pools of first mortgage loans
originated and serviced by the issuers of the
securities.  Mortgage-backed securities classified as
available-for-sale are carried at fair market value and unrealized gains and
losses are recognized as direct increases or decreases in comprehensive
income.  For mortgage-backed securities, and any other holdings for
which there is a prepayment risk, prepayment assumptions are evaluated and
revised as necessary. Any adjustments required due to the resultant change in
effective yields and maturities are recognized retrospectively. Prepayment fees
or call premiums that are only payable to the Company when a security is called
prior to its maturity are earned when received and reflected in net investment
income.  Purchase premiums and discounts are recognized in interest
income using the interest method over the terms of the securities.





Although
the Company generally intends to hold its investment securities until maturity,
it may, from time to time, sell any of its securities as part of the overall
management of its business.  The available-for-sale designation
provides the Company with the flexibility to sell any of its investment
securities.  Upon the sale of an investment security, any unrealized
gain or loss is reclassified out of accumulated other comprehensive
(loss)/income to earnings as a realized gain or loss using the specific
identification method.





The
Company adopted Statement of Financial Accounting Standard (“SFAS”) 157 entitled
Fair Value Measurements
as of January 1, 2008.  SFAS 157 defines fair value as the price
received to transfer an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date reflecting the
highest and best use valuation concepts. SFAS 157 establishes a framework
for measuring fair value in Generally Accepted Accounting Principles (“GAAP”) by
creating a hierarchy of fair value measurements that distinguishes market data
between observable independent market inputs and unobservable market assumptions
by the reporting entity. SFAS 157 further expands disclosures about such
fair value measurements. SFAS 157 applies broadly to most existing
accounting pronouncements that require or permit fair value measurements
(including both financial and non-financial assets and liabilities), but does
not require any new fair value measurements.





In
February 2008, the Financial Accounting Standards Board (“FASB”) issued FASB
Staff Position (“FSP”) SFAS 157-2, Effective Date of FASB Statement
No. 157 (“FSP SFAS 157-2”), which delayed the effective date of SFAS
No. 157 for all nonrecurring fair value measurements of nonfinancial assets
and liabilities until fiscal years beginning after November 15, 2008. The
Company will not delay the effective date of SFAS 157. On October 10, 2008,
the FASB issued FSP SFAS No. 157-3, Fair Value Measurements (“FSP
SFAS 157-3”), which clarifies the application of SFAS No. 157 in an
inactive market and provides an example to demonstrate how the fair value of a
financial asset is determined when the market for that financial asset is
inactive. FSP SFAS 157-3 was effective upon issuance, including prior periods
for which financial statements had not been issued. The adoption of this
standard did not have a material impact on the Company’s results of operations,
cash flows, or financial positions.








2008
Annual Report





Page
36




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
A


SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





SECURITIES
AVAILABLE-FOR-SALE (Continued)


The
Company accounts for its investment securities in accordance with SFAS No. 115,
Accounting for Certain
Investments in Debt and Equity Securities, (“SFAS 115”) which requires
that investments in securities be designated as either “held-to-maturity,”
“available-for-sale”, or “trading” at the time of acquisition.  The Company
determines the fair value of its investment securities based upon prices
obtained from a third-party pricing service and broker quotes.  (See
Note R.)  The Company applies the guidance prescribed in Financial
FASB Staff Position SFAS 115-1 and SFAS 124-1, The Meaning of Other-Than-Temporary
Impairment and its Application to Certain Investments (the “FASB Impairment
Position”).





The
Company assesses its investment securities for other-than-temporary impairment
on at least a quarterly basis.  When the fair value of an investment
is less than its amortized cost at the balance sheet date of the reporting
period for which impairment is assessed, the impairment is designated as either
“temporary” or “other-than-temporary.”  Declines in the fair value of
available-for-sale securities below their cost that are deemed to be
other-than-temporary are reflected in earnings as realized losses.  In
estimating other-than-temporary impairment losses, management considers 1) the
length of time and the extent to which the fair value has been less than cost,
2) the financial condition and near-term prospects of the issuer, and 3) the
intent and ability of the Company to retain its investment in the issuer for a
period of time sufficient to allow for any anticipated recovery in fair
value.  With respect to securities where the decline in value was
determined to be temporary and the security’s value was not written down, a
subsequent decision could be made to sell that security and realize the
loss.





Upon a
decision to sell an impaired available-for-sale investment security on which the
Company does not expect the fair value of the investment to fully recover prior
to the expected time of sale, the investment shall be deemed
other-than-temporarily impaired in the period in which the decision to sell is
made.  The Company recognizes an impairment loss when the impairment
is deemed other-than-temporary even if a decision to sell has not been
made.  Even if the inability to collect is not probable, the Company
may recognize an other-than-temporary loss if, for example, the Company does not
have the intent and ability to hold a security until its fair value has
recovered.





LOANS


The
Company, through its investment in the Bank, grants mortgage, commercial and
construction loans, and lines of credit to customers.  A substantial
portion of the loan portfolio consists of mortgage loans throughout the greater
New Orleans area.  The ability of the Company’s debtors to honor their
contracts is dependent upon the real estate and general economic conditions in
this area.





Loans are
reported at their outstanding unpaid principal balance adjusted for charge-offs,
the allowance for loan losses, and any deferred fees or costs on originated
loans.  Interest income is accrued on the unpaid principal
balance.  Loan origination and commitment fees, as well as certain
direct origination costs, are deferred and amortized as a yield adjustment over
the lives of the related loans using the interest method.  Net
deferred loan origination costs were $286,000 and $59,000 at December 31,
2008 and 2007, respectively. Amortization of net deferred loan fees or costs is
discontinued when a loan is placed on non-accrual status.








2008
Annual Report





Page
37




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)








NOTE
A


SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





LOANS
(Continued)


In
addition to loans issued in the normal course of business, the Company considers
overdrafts on customer deposit accounts to be loans and reclassifies these
overdrafts as loans in its Consolidated Balance Sheets.  At
December 31, 2008 and 2007, overdrafts of $2,000 and $13,000, respectively,
have been reclassified to loans receivable.





In
general, the accrual of interest on loans is discontinued at the time the loan
is 90 days past due.  At that time, uncollected interest previously
recorded is reversed against interest income, and the loan is placed on
nonaccrual. The interest collected on these loans is accounted for on the
cash-basis method or cost-recovery method which credits interest income in the
period it is collected.  Loans are returned to accrual status when all
principal and interest amounts contractually due are brought current and future
payments are reasonably assured. Interest on impaired loans is discontinued
when, in management’s opinion, the borrower may be unable to meet payments as
they become due.  The accrual of interest on commercial loans is
discontinued at the time the loan is 90 days delinquent unless the credit is
well-secured and in the process of collection. Mortgage, credit card, and other
personal loans are typically charged off to net collateral value, less cost to
sell, no later than 180 days past due. Past due status is based on the
contractual terms of the loans. In all cases, loans are placed on nonaccrual or
charged off at an earlier date if collection of principal or interest is
considered doubtful.





A loan is
considered impaired when, based on current information and events, it is
probable that the Company will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. Factors considered by management in determining impairment include
payment status, collateral value, and the probability of collecting scheduled
principal and interest payments when due. Loans that experience insignificant
payment delays and payment shortfalls generally are not classified as impaired.
The impairment loss is measured on a loan by loan basis based upon the present
value of expected future cash flows discounted at the loan’s effective interest
rate, the loan’s obtainable market price, or the fair value of the collateral if
the loan is collateral dependent.





ALLOWANCE
FOR LOAN LOSSES


The
allowance for loan losses is established as losses are estimated to have
occurred through a provision for loan losses charged to
earnings.  Loan losses are charged against the allowance when
management believes the loan balance is not collectable. Subsequent recoveries,
if any, are credited to the allowance.





The allowance for loan losses is
evaluated on a regular basis by management and is based upon management’s
periodic review of the Bank’s past loan loss experience, known and inherent
risks in the portfolio, adverse situations that may affect the borrower’s
ability to pay, the estimated value of underlying collateral, and prevailing
economic conditions.  This evaluation is inherently subjective, as it
requires estimates that are susceptible to significant revision as more
information becomes available.








2008
Annual Report





Page
38




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
A


SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





OTHER
REAL ESTATE


Assets
acquired through, or in lieu of, loan foreclosure are held for sale and are
initially recorded at the lower of the related loan balance or fair value less
estimated cost to sell at the date of foreclosure.  Management
periodically performs valuations and, if necessary, the net carrying value is
reduced to net realizable value through a charge to the allowance for loan
losses.  Costs related to improvement of the property are capitalized
to the extent they do not exceed fair value less estimated cost to
sell.  Whereas costs related to holding the property are charged to
operations.





PREMISES
AND EQUIPMENT


Land is
carried at cost.  Buildings and equipment are carried at cost, less
accumulated depreciation computed on the straight-line method over the estimated
useful lives of the assets of 10 to 39 years for building and improvements and 3
to 7 years for furniture and equipment.





REAL
ESTATE HELD-FOR-INVESTMENT


Real
estate held-for-investment consists of a multi-suite office
building.  The Company leases two of the four suites to the Bank,
which serve as a mortgage loan production office.  The remaining two
suites are leased by unrelated third parties.





FEDERAL
HOME LOAN BANK STOCK


As a
member of the Federal Home Loan Bank of Dallas (“FHLB”), the Company is required
to maintain an investment in the FHLB based on defined criteria, including total
assets.  The FHLB stock is carried at cost and is periodically
reviewed for impairment.  No ready market exists for the FHLB
stock.  Cost approximates fair market value.





INCOME
TAXES


The
Company and its wholly-owned subsidiary file a consolidated Federal income tax
return on a calendar year basis.  Each entity pays its pro rata share
of income taxes in accordance with a written tax-sharing agreement.





Deferred
income tax assets and liabilities are determined using the liability (or balance
sheet) method.  Under this method, the net deferred tax asset or
liability is determined based on the tax effects of the temporary differences
between the book and tax bases of the various balance sheet assets and
liabilities and gives current recognition to changes in tax rates and laws. If
necessary, the measurement of deferred tax assets is reduced by the amount of
any tax benefits that, based on available evidence, are not expected to be
realized.





Deferred
income tax assets and liabilities are reflected at currently enacted income tax
rates applicable to the period in which the deferred tax assets and liabilities
are expected to be realized or settled.  As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.








2008
Annual Report





Page
39




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)








NOTE
A


SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





INCOME
TAXES (Continued)


When tax
returns are filed, it is highly certain that some positions taken would be
sustained upon examination by the taxing authorities, while others are subject
to uncertainty about the merits of the position taken or the amount of the
position that would be ultimately sustained.  The benefit of a tax
position is recognized in the financial statements in the period during which,
based on all available evidence, management believes it is more likely than not
that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any.





Tax
positions taken are not offset or aggregated with other
positions.  Tax positions that meet the more-likely-than-not
recognition threshold are measured as the largest amount of tax benefit that is
more than 50% likely of being realized upon settlement with the applicable
taxing authority.  The portion of the benefits associated with tax
positions taken that exceeds the amount measured as described above would be
reflected as a liability for unrecognized tax benefits in the consolidated
balance sheets along with any associated interest or penalties that would be
payable to the taxing authorities upon examination.  Interest and/or
penalties associated with unrecognized tax benefits, if any, would be classified
as additional income taxes in the statements of income.





While the
Bank is exempt from Louisiana income tax, it is subject to the Louisiana Ad
Valorem tax on the assessed value of the shares of the Company’s stock which is
based on stockholders’ equity and net income. The assessed values are allocated
to the various parishes where the Company’s branches are located based on the
situs of deposits and are subject to the local property tax millage
rates.





STOCK
COMPENSATION PLANS


During
2005, the FASB revised SFAS No. 123.  SFAS No. 123(R) replaces the
prior SFAS No. 123 and superseded APB Opinion No. 25.  This Statement
requires a public entity to measure the cost of employee services received in
exchange for an award of equity instruments based on the grant date fair value
of the award.  That cost is to be recognized over the period during
which an employee is required to provide service in exchange for the
award.  The adoption had no impact on the Company’s interim or annual
financial statements for 2008, 2007, or 2006, since all outstanding options
issued became fully vested in 2002 and all unexercised options expired in
2007.





ADVERTISING
COSTS


The
Company expenses advertising costs as incurred.  Advertising costs
were $51,000, $139,000, and $40,000 for the years ended December 31, 2008, 2007
and 2006, respectively.





EARNINGS
PER COMMON SHARE


Basic
earnings per share represents income available to common shareholders divided by
the weighted average number of common shares outstanding during the period.
Diluted earnings per share reflect additional common shares that would have been
outstanding if dilutive potential common shares had been issued, as well as any
adjustment to income that would result from the assumed issuance. Potential
common shares that may be issued by the Company relate to outstanding stock
options, warrants, and unvested restricted stock that are determined using the
treasury stock method.








2008
Annual Report





Page
40




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
A


SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





COMPREHENSIVE
INCOME


Accounting
principles generally require that recognized revenue, expenses, gains, and
losses be included in net income.  Although certain changes in assets
and liabilities, such as unrealized gains and losses on available-for-sale
securities, are reported as a separate component of stockholders’ equity in the
balance sheets; such items, along with net income, are components of
comprehensive income.





ADOPTION
OF NEW ACCOUNTING STANDARDS AND INTERPRETATIONS


FASB
Staff Position (“FSP”) EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,
was issued in June 2008. This FSP concluded that unvested share-based payment
awards that contain non-forfeitable rights to dividends or dividend equivalents
are participating securities and must be included in the computation of earnings
per share using the two-class method described in SFAS No. 128,
Earnings per Share. This guidance is effective for financial statements issued
for the Company’s 2009 fiscal year and must be applied retrospectively to
earnings per share data presented for all prior periods. The Company does not
expect adoption of this FSP to have an impact of its reported earnings per
share.





The FASB
issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities (an amendment of
SFAS No. 133), in March 2008. This standard calls for enhanced
disclosures to help users of financial statements better understand how and why
an entity uses derivative instruments, how derivative instruments and related
hedged items are accounted for, and how these instruments and hedged items
affect the entity’s financial position, financial performance, and cash flows.
To meet those objectives, SFAS No. 161 requires qualitative
disclosures about objectives and strategies for using derivatives, disclosures
about the fair value of and gains and losses on derivative instruments, and
disclosures about credit-risk contingent features in derivative agreements. This
statement is effective for the Bank’s 2009 fiscal year, with earlier application
encouraged. The Bank currently makes minimal use of derivative
instruments.





In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles, which identifies the sources of accounting
principles and the framework for selecting the principles used in the
preparation of financial statements in conformity with generally accepted
accounting principles. The Statement is effective 60 days following the
Securities and Exchange Commission’s (“SEC”) approval of the Public Company
Accounting Oversight Board amendments to AU Section 411. The Company will
adopt the provisions of SFAS No. 162 when effective but does not anticipate
adoption will have a material effect on the operating results, financial
position, or liquidity of the Company.








2008
Annual Report





Page
41




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)








NOTE
A


SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





ADOPTION
OF NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (Continued)


In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilitieswhich included an amendment of FASB No.
115.  This Statement permits entities to choose to measure many
financial instruments and certain other items at fair value.  The
objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions.  This Statement is expected to expand the use
of fair value measurement.  This Statement is effective as of the
beginning of an entity’s first fiscal year that begins after November 15,
2007.  The Company did not make an early adoption election nor has it
chosen to measure the financial instruments identified under SFAS No. 159 at
fair value.





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements.  SFAS 160 amends Accounting
Research Bulletin 51, Consolidated Financial
Statements, to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary.  SFAS 160 is effective for fiscal periods, and interim
periods within those fiscal years, beginning on or after December 15,
2008.  Management believes the adoption of this pronouncement will not
have a material impact on the Company’s financial statements.




In
December 2007, the FASB revised SFAS No. 141(R) Business Combinations to
improve the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial reports about a
business combination and its effects. To accomplish that, SFAS No. 141(R)
establishes principles and requirements for how the acquirer: 1) recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree; 2)
recognizes and measures the goodwill acquired in the business combination or a
gain from a bargain purchase; and 3) determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination.  This Statement applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The Company is evaluating the effect of SFAS No. 141(R) on
its financial statements.




In
September 2008 FASB issued FASB Staff Position SFAS 133-1 and FIN 45-4,
Disclosures about Credit Derivatives and Financial Guarantees. The FSP requires
companies that sell credit derivatives to disclose information that will enable
financial statement users to assess the potential effect of the credit
derivatives on the seller’s financial position, financial performance, and cash
flows. FSP FAS 133-1 and FIN 45-4 are effective for interim and annual periods
ending after November 15, 2008. These pronouncements are not expected to have an
effect on the financial position and results of operations of the
Company.








2008
Annual Report





Page
42








GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)




NOTE
A


SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





ADOPTION
OF NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (Continued)




In
February 2008, FASB issued FSP SFAS 140-3, Accounting for Transfers of
Financial Assets and Repurchase Financing Transactions, which provides
guidance on accounting for a transfer of a financial asset and a repurchase
financing. The FSP presumes that an initial transfer of a financial asset and a
repurchase financing are considered part of the same arrangement under FASB
Statement No. 140 Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities.  However, if certain criteria are met, the initial
transfer and repurchase shall not be evaluated as a linked transaction and
therefore evaluated separately under FASB 140.  The FSP is effective
for repurchase financing in which the initial transfer is entered in fiscal
years beginning after November 15, 2008.  The Company does not
anticipate a material impact on its consolidated financial statements as a
result of this statement.




In April
2008, FASB issued FSP 142-3 which amends the list of factors an entity should
consider in developing renewal of extension assumptions used in determining the
useful life of recognized intangible assets under SFAS 142 Goodwill and Other
Intangibles.  The new guidance applies to intangible assets
that are acquired individually or with a group of other assets and to intangible
assets acquired in both business combinations and asset
acquisitions.  The FSP is effective for financial statements issued
for fiscal years beginning after December 15, 2008 and interim periods within
those fiscal years.  The guidance must be applied prospectively only
to intangible assets acquired after the FSP’s effective date.





RECLASSIFICATIONS


Certain
prior period amounts have been reclassified to conform to the current period
presentation.





NOTE
B


SECURITIES
AVAILABLE-FOR-SALE


The
amortized costs and fair value of securities available-for-sale, with gross
unrealized gains and losses, follows:


December 31,
      2008Gross
                              
                              
                              GrossAmortized
                              
                              
                              Unrealized
                              
                              
                              Unrealized
                              
                              
                              FairCost
                              
                              
                              Gains
                              
                              
                              Losses
                              
                              
                              Value(In
      Thousands)Debt
      Securities:U.S.
      Government and Federal Agencies
                              
                              $
                              10,010
                              
                              
                              $
                              121
                              
                              
                              $
                              61
                              
                              
                              $
                              10,070Mortgage-Backed
      Securities
                              
                              
                              25,484
                              
                              
                              
                              714
                              
                              
                              
                              98
                              
                              
                              
                              26,100Collateralized
      Mortgage Obligations
                              
                              
                              9,035
                              
                              
                              
                              -
                              
                              
                              
                              996
                              
                              
                              
                              8,039Total
      Debt Securities
                              
                              
                              44,529
                              
                              
                              
                              835
                              
                              
                              
                              1,155
                              
                              
                              
                              44,209Marketable
      Equity Securities:Mutual
      Funds
                              
                              
                              3,408
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              3,408Total
      Securities Available-for-Sale
                              
                              $
                              47,937
                              
                              
                              $
                              835
                              
                              
                              $
                              1,155
                              
                              
                              $
                              47,617





2008
Annual Report





Page
43




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
B


SECURITIES
AVAILABLE-FOR-SALE (Continued)








December
      31, 2007Gross
                      
                      
                      GrossAmortized
                      
                      
                      Unrealized
                      
                      
                      Unrealized
                      
                      
                      FairCost
                      
                      
                      Gains
                      
                      
                      Losses
                      
                      
                      Value(In
      Thousands)Debt
      Securities:U.S.
      Government and Federal Agencies
                      
                      $
                      18,492
                      
                      
                      $
                      138
                      
                      
                      $
                      209
                      
                      
                      $
                      18,421Mortgage-Backed
      Securities
                      
                      
                      8,849
                      
                      
                      
                      88
                      
                      
                      
                      25
                      
                      
                      
                      8,912Collateralized
      Mortgage Obligations
                      
                      
                      14,736
                      
                      
                      
                      10
                      
                      
                      
                      113
                      
                      
                      
                      14,633Total
      Debt Securities
                      
                      
                      42,077
                      
                      
                      
                      236
                      
                      
                      
                      347
                      
                      
                      
                      41,966Marketable
      Equity Securities:Mutual
      Funds
                      
                      
                      5,837
                      
                      
                      
                      -
                      
                      
                      
                      56
                      
                      
                      
                      5,781Total
      Securities Available-for-Sale
                      
                      $
                      47,914
                      
                      
                      $
                      236
                      
                      
                      $
                      403
                      
                      
                      $
                      47,747








The
amortized cost and fair value of debt securities by contractual maturity at
December 31, 2008, follows.  Debt securities with scheduled
repayments, such as mortgage-backed-securities and collateralized mortgage
obligations, are presented in separate totals.  The expected life of a
security, in particular certain U.S. Agency securities, may differ from its
contractual maturity because of the exercise of call options.





SecuritiesAvailable
      for SaleAmortized
                        Cost
                      
                      
                      Fair
                        Value(In
    Thousands)Amounts
      Maturing in:Within
      One Year
                      
                      $
                      -
                      
                      
                      $
                      -One
      to Five Years
                      
                      
                      -
                      
                      
                      
                      -Five
      to Ten Years
                      
                      
                      -
                      
                      
                      
                      -Greater
      than Ten Years
                      
                      
                      10,010
                      
                      
                      
                      10,07010,010
                      
                      
                      
                      10,070Mortgage-Backed
      Securities
                      
                      
                      25,484
                      
                      
                      
                      26,100Collateralized
      Mortgage Obligations
                      
                      
                      9,035
                      
                      
                      
                      8,039$
                      44,529
                      
                      
                      $
                      44,209








For the
years ended December 31, 2008, 2007, and 2006, proceeds from the sale of
securities available-for-sale amounted to $5,003,000, $-0-, and $14,963,000,
respectively.  Gross realized gains amounted to $20,000, $-0-, and
$3,000, respectively.  Gross realized losses in 2008, 2007, and 2006
were $17,000, $-0-, and $-0-, respectively.  Proceeds from called
securities in 2008, 2007, and 2006 were $13,500,000, $10,000,000, and $-0-,
respectively.








2008
Annual Report





Page
44




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
B


SECURITIES
AVAILABLE-FOR-SALE (Continued)


The
Company also redeemed shares of its investment in mutual funds during the years
ended December 31, 2008, 2007, and 2006.  Proceeds from the
redemption of these shares amounted to $1,061,000, $5,000,000 and $38,463,000 in
2008, 2007, and 2006, respectively, and the Company realized losses of $77,000,
$-0-, and $93,000 on these redemptions, respectively.





In
accordance with the Company’s policy to review the investment portfolio for
declines that may be other-than-temporary, an impairment charge of $1,281,000
against two mutual funds, which hold mortgage-backed securities that have been
downgraded by ratings agencies, was recorded during the year ended December 31,
2008.  The Company did not recognize any other-than-temporary
impairment charges against any securities during the years ended December 31,
2007 and 2006.





No
securities were pledged at December 31, 2008 and 2007.





Information
pertaining to securities with gross unrealized losses at December 31, 2008 and
2007, aggregated by investment category and length of time that individual
securities have been in a continuous loss position, follows:





Less
      Than Twelve Months
                      
                      
                      Over
      Twelve MonthsDecember 31, 2008
                      
                      Gross
      Unrealized Losses
                      
                      
                      Fair
      Value
                      
                      
                      Gross
      Unrealized Losses
                      
                      
                      Fair
      Value(In
      Thousands)U.S.
      Government and Federal Agencies
                      
                      $
                      61
                      
                      
                      $
                      4,939
                      
                      
                      $
                      -
                      
                      
                      $
                      -Mortgage-Backed
      Securities
                      
                      
                      54
                      
                      
                      
                      2,150
                      
                      
                      
                      44
                      
                      
                      
                      1,014Collateralized
      Mortgage Obligations
                      
                      
                      482
                      
                      
                      
                      4,263
                      
                      
                      
                      514
                      
                      
                      
                      3,776Marketable
      Equity Securities
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Total
      Securities
                      
                      $
                      597
                      
                      
                      $
                      11,352
                      
                      
                      $
                      558
                      
                      
                      $
                      4,790








Less
      Than Twelve Months
                      
                      
                      Over
      Twelve MonthsDecember 31, 2007
                      
                      Gross
      Unrealized Losses
                      
                      
                      Fair
      Value
                      
                      
                      Gross
      Unrealized Losses
                      
                      
                      Fair
      Value(In
      Thousands)U.S.
      Government and Federal Agencies
                      
                      $
                      -
                      
                      
                      $
                      2,033
                      
                      
                      $
                      70
                      
                      
                      $
                      16,527Mortgage-Backed
      Securities
                      
                      
                      25
                      
                      
                      
                      5,620
                      
                      
                      
                      -
                      
                      
                      
                      3,292Collateralized
      Mortgage Obligations
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      172
                      
                      
                      
                      14,574Marketable
      Equity Securities
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      56
                      
                      
                      
                      5,781Total
      Securities
                      
                      $
                      25
                      
                      
                      $
                      7,653
                      
                      
                      $
                      298
                      
                      
                      $
                      40,174







2008
Annual Report





Page
45




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)




NOTE
B


SECURITIES
AVAILABLE-FOR-SALE (Continued)





The increase in the unrealized losses
associated with the Company’s available-for-sale securities during 2008 was
primarily caused by the decrease in liquidity experienced by certain sectors in
the financial markets particularly during the latter half of the year. Because
the Company has the ability to hold these investments for a reasonable period of
time sufficient for recovery of fair value, which may be maturity for the
Collateralized Mortgage Obligations, it does not consider these investments to
be other-than-temporarily impaired at December 31, 2008.





NOTE
C


LOANS


A summary
of the balances of loans follows:





December
      31,2008
                            
                            
                            2007(In
      Thousands)Loans
      Secured by Mortgages on Real Estate:1-4
      Family Residential
                            
                            $
                            76,278
                            
                            
                            $
                            62,481Construction
                            
                            
                            10,542
                            
                            
                            
                            9,074Commercial
      Real Estate
                            
                            
                            53,952
                            
                            
                            
                            37,851Other
      Real Estate
                            
                            
                            13,664
                            
                            
                            
                            7,906Total
      Real Estate Loans
                            
                            
                            154,436
                            
                            
                            
                            117,312Consumer
      Loans
                            
                            
                            1,713
                            
                            
                            
                            913Commercial
      Loans
                            
                            
                            4,807
                            
                            
                            
                            3,625Total
      Loans
                            
                            
                            160,956
                            
                            
                            
                            121,850Allowance
      for Loan Losses
                            
                            
                            (2,719
                            )
                            
                            
                            (3,432
                            )Net
      Deferred Loan Origination Costs
                            
                            
                            286
                            
                            
                            
                            59Loans,
      Net
                            
                            $
                            158,523
                            
                            
                            $
                            118,477








An
analysis of the allowance for loan losses is as follows:




Years
      Ended December 31,2008
                      
                      
                      2007
                      
                      
                      2006(In
      Thousands)Balance,
      Beginning of Year
                      
                      $
                      3,432
                      
                      
                      $
                      3,732
                      
                      
                      $
                      5,713Charge-offs
                      
                      
                      (713
                      )
                      
                      
                      -
                      
                      
                      
                      -Recoveries
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Provision
      (Reversal) for Loan Losses
                      
                      
                      -
                      
                      
                      
                      (300
                      )
                      
                      
                      (1,981
                      )Balance,
      End of Year
                      
                      $
                      2,719
                      
                      
                      $
                      3,432
                      
                      
                      $
                      3,732







2008
Annual Report





Page
46




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
C


LOANS
(Continued)


Loans
receivable as of December 31, 2008, are scheduled to mature and adjustable rate
loans are scheduled to re-price as follows:





Under
      One Year
                    
                    
                    One
      to Five Years
                    
                    
                    Six
      to Ten Years
                    
                    
                    Over
      Ten Years
                    
                    
                    Total(In
      Thousands)1-4
      Family, Residential
                    
                    $
                    15,836
                    
                    
                    $
                    15,562
                    
                    
                    $
                    7,157
                    
                    
                    $
                    46,312
                    
                    
                    $
                    84,867Commercial
      Real Estate
                    
                    
                    5,701
                    
                    
                    
                    32,692
                    
                    
                    
                    8,863
                    
                    
                    
                    8,053
                    
                    
                    
                    55,309Other
      Real Estate
                    
                    
                    2,788
                    
                    
                    
                    7,882
                    
                    
                    
                    2,175
                    
                    
                    
                    1,415
                    
                    
                    
                    14,260All
      Other Loans
                    
                    
                    1,991
                    
                    
                    
                    3,140
                    
                    
                    
                    152
                    
                    
                    
                    1,237
                    
                    
                    
                    6,520Total
                    
                    $
                    26,316
                    
                    
                    $
                    59,276
                    
                    
                    $
                    18,347
                    
                    
                    $
                    57,017
                    
                    
                    $
                    160,956






Loans for
which impairment had been recognized totaled approximately $4,064,000 and
$6,101,000 at December 31, 2008 and 2007, respectively.  The valuation
allowance related to impaired loans amounted to $351,000 and $682,000 at
December 31, 2008 and 2007, respectively.  The amount of interest
income that would have been recorded on impaired loans for the years ended
December 31, 2008 and 2007, was $38,000 and $35,000, respectively.





In the ordinary course of business, the
Company has granted loans to principal officers and directors and their
affiliates.  In the opinion of management, such transactions were on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time of comparable transactions with other persons and did not
involve more than a normal risk of collectability or present any other
unfavorable features to the Company.





An
analysis of the changes in loans to such borrowers follows:





December 31,2008
                    
                    
                    2007(In
      Thousands)Balance,
      Beginning of Year
                    
                    $
                    560
                    
                    
                    $
                    620Additions
                    
                    
                    50
                    
                    
                    
                    -Payments
      and Renewals
                    
                    
                    (205
                    )
                    
                    
                    (60
                    )Balance,
      End of Year
                    
                    $
                    405
                    
                    
                    $
                    560








The
Company’s lending activity is concentrated within the greater New Orleans area
and surrounding parishes, with its major emphasis in the origination of
permanent single-family dwelling loans and real-estate secured commercial
loans.  Such loans comprise the majority of the Company’s loan
portfolio.








2008
Annual Report





Page
47




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)




NOTE
D


ACCRUED
INTEREST RECEIVABLE


Accrued
interest receivable consists of the following:





December
      31,2008
                    
                    
                    2007(In
      Thousands)Loans
                    
                    $
                    1,219
                    
                    
                    $
                    1,462Securities
                    
                    
                    393
                    
                    
                    
                    366Total
      Accrued Interest
                    
                    $
                    1,612
                    
                    
                    $
                    1,828








NOTE
E


PREMISES
AND EQUIPMENT


A summary
of the cost and accumulated depreciation of premises and equipment
follows:




December
      31,2008
                    
                    
                    2007(In
      Thousands)Land
                    
                    $
                    2,629
                    
                    
                    $
                    2,755Buildings
      and Improvements
                    
                    
                    3,339
                    
                    
                    
                    3,157Furniture,
      Fixtures, and Equipment
                    
                    
                    1,514
                    
                    
                    
                    1,418Total
      Premises and Equipment
                    
                    
                    7,482
                    
                    
                    
                    7,330Accumulated
      Depreciation and Amortization
                    
                    
                    (1,726
                    )
                    
                    
                    (1,456
                    )Total
      Premises and Equipment, Net
                    
                    $
                    5,756
                    
                    
                    $
                    5,874








Depreciation
expense for the years ended December 31, 2008, 2007, and 2006, was approximately
$270,000, $215,000, and $158,000, respectively.





NOTE
F


REAL
ESTATE HELD-FOR-INVESTMENT


Real
estate held-for-investment, which consists of a multi-suite office building that
includes a branch location of the Bank, is summarized below:





December
      31,2008
                    
                    
                    2007(In
      Thousands)Land
                    
                    $
                    226
                    
                    
                    $
                    226Buildings
      and Improvements
                    
                    
                    320
                    
                    
                    
                    320Total
      Real Estate Held-for-Investment
                    
                    
                    546
                    
                    
                    
                    546Accumulated
      Depreciation and Amortization
                    
                    
                    (110
                    )
                    
                    
                    (96
                    )Total
      Real Estate Held-for-Investment, Net
                    
                    $
                    436
                    
                    
                    $
                    450







2008
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48




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
F


REAL
ESTATE HELD-FOR-INVESTMENT (Continued)


Depreciation
expense for each of the years ended December 31, 2008, 2007, and 2006, was
$14,000, $14,000 and $14,000, respectively.





Rental
income for the years ended December 31, 2008, 2007, and 2006 was $56,000,
$52,000, and $52,000, respectively.





NOTE
G


DEPOSITS


Interest-bearing
deposit account balances at December 31, 2008 and 2007, are summarized as
follows:





Weighted
      Average
                                
                                
                                Account Balances at December
      31,December
31,
                                
                                
                                2008
                                
                                
                                20072008
                                
                                
                                2007
                                
                                
                                Amount
                                
                                
                                Percent
                                
                                
                                Amount
                                
                                
                                Percent(
      In Thousands)Balance
      by Interest Rate:NOW
      and MMDA Accounts
                                
                                
                                2.44
                                %
                                
                                
                                2.39
                                %
                                
                                $
                                32,841
                                
                                
                                
                                24.85
                                %
                                
                                $
                                23,632
                                
                                
                                
                                19.09
                                %Savings
      Accounts
                                
                                
                                0.50
                                %
                                
                                
                                1.00
                                %
                                
                                
                                15,305
                                
                                
                                
                                11.58
                                %
                                
                                
                                19,245
                                
                                
                                
                                15.54
                                %Certificates
      of Deposit
                                
                                
                                3.49
                                %
                                
                                
                                4.64
                                %
                                
                                
                                83,999
                                
                                
                                
                                63.57
                                %
                                
                                
                                80,948
                                
                                
                                
                                65.37
                                %$
                                132,145
                                
                                
                                
                                100.00
                                %
                                
                                $
                                123,825
                                
                                
                                
                                100.00
                                %Certificates
      Accounts Maturing:One
      Year or Less
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                $
                                61,129
                                
                                
                                
                                72.77
                                %
                                
                                $
                                63,953
                                
                                
                                
                                79.01
                                %One
      to Two Years
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                16,287
                                
                                
                                
                                19.39
                                %
                                
                                
                                6,533
                                
                                
                                
                                8.07
                                %Two
      to Three Years
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                3,973
                                
                                
                                
                                4.73
                                %
                                
                                
                                8,308
                                
                                
                                
                                10.26
                                %Three
      to Five Years
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                2,610
                                
                                
                                
                                3.11
                                %
                                
                                
                                2,154
                                
                                
                                
                                2.66
                                %$
                                83,999
                                
                                
                                
                                100.00
                                %
                                
                                $
                                80,948
                                
                                
                                
                                100.00
                                %








The
aggregate amount of time deposits in denominations of $100,000 or more at
December 31, 2008 and 2007, was approximately $23,103,000 and $18,316,000,
respectively.





Interest
expense for each of the following periods is as follows:





Years Ended December
      31,2008
                          
                          
                          2007
                          
                          
                          2006(
      In Thousands)NOW
      and MMDA Accounts
                          
                          $
                          633
                          
                          
                          $
                          722
                          
                          
                          $
                          388Savings
      Accounts
                          
                          
                          130
                          
                          
                          
                          247
                          
                          
                          
                          339Certificates
      of Deposit
                          
                          
                          3,218
                          
                          
                          
                          3,617
                          
                          
                          
                          2,938$
                          3,981
                          
                          
                          $
                          4,586
                          
                          
                          $
                          3,665








The Bank
held deposits of approximately $1,241,000 and $1,424,000 for related parties at
December 31, 2008 and 2007, respectively.








2008
Annual Report





Page
49




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
H


BORROWINGS


Pursuant
to collateral agreements with the Federal Home Loan Bank of Dallas, advances
issued by the FHLB are secured by a blanket floating lien on first mortgage
loans and certain pledged Collateralized Mortgage Obligations.





Advances
consisted of the following at December 31, 2008 and 2007,
respectively.





FHLB Advance
      TotalContract
      Rate
                        
                        2008
                        
                        
                        2007(In
    Thousands)0.00%
      - 2.99%
                        
                        $
                        8,100
                        
                        
                        $
                        -3.00%
      - 3.99%
                        
                        
                        21,750
                        
                        
                        
                        -4.00%
      - 4.99%
                        
                        
                        17,750
                        
                        
                        
                        11,0005.00%
      - 5.99%
                        
                        
                        4,402
                        
                        
                        
                        15,986$
                        52,002
                        
                        
                        $
                        26,986








Maturities
of FHLB advances at December 31, 2008, are as follows:




Year
      Ending December 31,
                      
                      Amount
      Maturing(
      In Thousands)2009
                      
                      $
                      13,1742010
                      
                      
                      15,5782011
                      
                      
                      12,5832012
                      
                      
                      7,6672013
                      
                      
                      3,000$
                      52,002








Total
interest expense recognized on FHLB advances in 2008, 2007, and 2006 was
$1,770,000, $961,000, and $1,239,000, respectively.





NOTE
I


INCOME
TAX EXPENSE


The
provision for income taxes for 2008, 2007, and 2006, consists of the
following:





Years
      Ended December 31,2008
                          
                          
                          2007
                          
                          
                          2006(In
      Thousands)Current
      Tax Expense (Benefit)
                          
                          $
                          242
                          
                          
                          $
                          (612
                          )
                          
                          $
                          193Deferred
      Tax (Benefit) Expense
                          
                          
                          (228
                          )
                          
                          
                          970
                          
                          
                          
                          895$
                          14
                          
                          
                          $
                          358
                          
                          
                          $
                          1,088







2008
Annual Report





Page
50




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
I


INCOME
TAX EXPENSE (Continued)


The
provision for Federal income taxes differs from that computed by applying
Federal statutory rates to income before Federal income tax expense, as
indicated in the following analysis:





Years Ended
      December 31,2008
                    
                    
                    2007
                    
                    
                    2006(In
    Thousands)Expected Tax Provision at a 34%
      Rate
                    
                    $
                    3
                    
                    
                    $
                    346
                    
                    
                    $
                    1,089Expected State Corporate
      Tax
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    3Employee Stock Ownership
      Plan
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    63Other
                    
                    
                    11
                    
                    
                    
                    12
                    
                    
                    
                    (67
                    )$
                    14
                    
                    
                    $
                    358
                    
                    
                    $
                    1,088








The net
deferred tax assets or liabilities in the accompanying consolidated balance
sheets include the following components:





December
31,2008
                      
                      
                      2007(In
    Thousands)Deferred Tax
      AssetsRecognition and Retention
      Plan
                      
                      $
                      5
                      
                      
                      $
                      5Credits
      Carryforward
                      
                      
                      63
                      
                      
                      
                      118Recognition of
      Other-than-Temporary Decline inMarket Value of Available-for-Sale
      Securities
                      
                      
                      529
                      
                      
                      
                      93Market Value Adjustment to
      Available-for-Sale Securities
                      
                      
                      327
                      
                      
                      
                      56Net Operating Loss
      Carryforward
                      
                      
                      -
                      
                      
                      
                      356Capital Loss
      Carryforward
                      
                      
                      356
                      
                      
                      
                      322Allowance for Loan
      Losses
                      
                      
                      93
                      
                      
                      
                      93Other
                      
                      
                      -
                      
                      
                      
                      11Total Deferred Tax
      Assets
                      
                      
                      1,373
                      
                      
                      
                      1,054Deferred Tax
      LiabilitiesPremises and
      Equipment
                      
                      
                      (319
                      )
                      
                      
                      (297
                      )Section 585 Bad Debt
      Deduction
                      
                      
                      (358
                      )
                      
                      
                      (455
                      )FHLB Stock
      Dividends
                      
                      
                      (275
                      )
                      
                      
                      (261
                      )Other
                      
                      
                      (371
                      )
                      
                      
                      (47
                      )Total Deferred Tax
      Liabilities
                      
                      
                      (1,323
                      )
                      
                      
                      (1,060
                      )Valuation
      Allowance
                      
                      
                      (241
                      )
                      
                      
                      (241
                      )Net Deferred Tax
      Liability
                      
                      $
                      (191
                      )
                      
                      $
                      (247
                      )







2008
Annual Report





Page
51




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
I


INCOME
TAX EXPENSE (Continued)


SFAS No.
109 requires a valuation allowance to be recorded when it is more likely than
not that some or all of the deferred tax assets will not be
realized.  At December 31, 2008 and 2007, a valuation allowance of
$241,000 which represents approximately 50% of the recognition of the
other-than-temporary decline of market value of available-for-sale securities,
was recorded because of uncertainties as to the amount of capital gains that
would be generated in future years.





Included
in retained earnings at December 31, 2008 and 2007, is approximately $3,800,000
in bad debt reserves for which no deferred Federal income tax liability has been
recorded.  This amount represents allocations of income to bad debt
deductions for tax purposes only.  Reduction of these reserves for
purposes other than tax bad-debt losses or adjustments arising from carryback of
net operating losses would create income for tax purposes, which would be
subject to the then-current corporate income tax rate.  The unrecorded
deferred liability on this amount was approximately $1,292,000 for December 31,
2008 and 2007, respectively.





The
Company had no amount of interest and/or penalties recognized in the
consolidated statements of income for the years ended December 31, 2008, 2007,
or 2006, nor any amount of interest and/or penalties payable that were
recognized in the consolidated balance sheets as of December 31, 2008 or
2007.





As of
December 31, 2008, the tax years that remain open for examination by tax
jurisdictions include 2007, 2006 and 2005.





NOTE
J


EMPLOYEE
STOCK OWNERSHIP PLAN


During
1997, GS Financial Corp. instituted an employee stock ownership plan. The GS
Financial Corp. Employee Stock Ownership Plan (“ESOP”) enables all eligible
employees of the Bank to share in the growth of the Company through the
acquisition of stock.  Employees were generally eligible to
participate in the ESOP after completion of one year of service and attaining
age 21.





The ESOP
purchased eight percent of the shares offered in the initial public offering of
the Company (275,080 shares).  This purchase was facilitated by a loan
from the Company to the ESOP in the amount of $2,750,800.  The loan
was secured by a pledge of the ESOP shares.  The shares pledged as
collateral were reported as unearned ESOP shares in the balance
sheets.  The corresponding note was paid back in 40 equal quarterly
payments of $103,000 on the last business day of each quarter, beginning June
30, 1997, at the rate of 8.5%.  The loan was fully repaid as of
December 31, 2006, but in prior periods the note payable and the corresponding
note receivable had been eliminated for consolidation purposes.





The
Company made contributions to the plan, in the form of debt service, at the
discretion of its Board of Directors.  Dividends received on the ESOP
shares were utilized to service the debt.  Shares were released for
allocation to plan participants based on principal and interest payments of the
note.  Compensation expense was recognized based on the number of
shares allocated to plan participants each year and the average market price of
the stock for the current year.  Released ESOP shares become
outstanding for earnings per share computations.








2008
Annual Report





Page
52




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)




NOTE
J


EMPLOYEE
STOCK OWNERSHIP PLAN (Continued)





As
compensation expense was incurred, the Unearned ESOP Shares account was reduced
based on the original cost of the stock.  The difference between the
cost and average market price of shares released for allocation was applied to
Additional Paid-In Capital.  ESOP compensation expense was
approximately $-0-, $-0-, and $407,000 for the years ended
December 31, 2008, 2007, and 2006, respectively.





As of
December 31, 2008 and 2007, the carrying value of the allocated ESOP shares were
135,871 and 179,591, respectively.  The stock price as of December 31,
2008 and 2007, was $12.50 and $18.94, respectively.





Effective
January 1, 2007, the Company amended and restated its ESOP, added a 401(k)
feature and renamed the plan the “Guaranty Savings Bank 401(k) Plan” (the
“401(k) Plan”).  ESOP shares are maintained in the 401(k) Plan, which
provides the ability to diversify into other 401(k) Plan
investments.  Employees may defer up to 15% of their salary, up to the
IRS maximum ($16,500 in 2008; $15,500 in 2007) on a tax-deferred basis and have
a variety of investment options, including a money market fund, fixed-income,
blended and equity mutual funds, and GS Financial Corp. stock.  The
Company matches 100% of contributions up to 3% of an employee’s salary and 50%
of the next 2% of employee contributions.  This match enables the
401(k) Plan to comply with IRS safe harbor rules exempting it from top-heavy
testing and maintaining its tax-exempt status.  In addition, the
Company may, at its discretion, make additional profit sharing contributions of
up to 6% of participants’ salaries.  The total amount of matching and
profit sharing contributions to the plan were $156,000 and $90,000 for the years
ended December 31, 2008 and 2007, respectively.





NOTE
K


RECOGNITION
AND RETENTION PLAN


On
October 15, 1997, the Company established a Recognition and Retention Plan
(the “Plan”) as an incentive to retain personnel of experience and ability
in key positions.  The Company approved a total of 137,540 shares of
stock to be acquired for the Plan, of which 125,028 shares were allocated for
distribution to key employees and directors. The Plan terminated by its terms in
October 2007 and no additional awards have been made under the Plan since such
date or will be made in the future. However, unvested awards made prior to
October 2007 continue to vest in accordance with their terms and the
Plan.





As shares
are acquired for the Plan, the purchase price of these shares is recorded as
unearned compensation, a contra equity account.  As the shares are
distributed, the contra equity account is reduced.





During
1998, with unanimous approval of the Plan participants, all outstanding grants
were amended by the Board in a direct effort to reduce the Company’s expenses
resulting from the Plan.  Prior to the amendments, Plan share awards
were earned by recipients at a rate of 20% of the aggregate number of shares
covered by the Plan over five years.  Plan share awards were amended
to provide that they are earned by recipients at a rate of 10% of the aggregate
number of shares covered by the plan over ten years.  If the
employment of an employee or service as a non-employee director was terminated
prior to the tenth anniversary of the grant date of the Plan share award for any
reason (except for death, disability, or a change in control), the recipient
would forfeit the right to any shares subject to the awards which had not been
earned.








2008
Annual Report





Page
53




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
K


RECOGNITION
AND RETENTION PLAN (Continued)





During
2007, the Company granted 5,000 shares to its President, which vest over a ten
year period at a rate of 10% per year.  No additional shares were
granted in 2008.





Compensation
expense pertaining to the Recognition and Retention Plan was $17,000, $111,000,
and $126,000, for the years ended December 31, 2008, 2007, and 2006,
respectively.





A summary
of the changes in restricted stock follows:





Unawarded
      Shares
                  
                  
                  Awarded
    Shares2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007Balance,
      Beginning of Year
                  
                  
                  -
                  
                  
                  
                  14,968
                  
                  
                  
                  8,248
                  
                  
                  
                  13,369Purchased
      by Plan
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Granted
                  
                  
                  -
                  
                  
                  
                  (5,000
                  )
                  
                  
                  -
                  
                  
                  
                  5,000Forfeited/Expired
                  
                  
                  -
                  
                  
                  
                  (9,968
                  )
                  
                  
                  -
                  
                  
                  
                  (559
                  )Earned
      and Issued
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (914
                  )
                  
                  
                  (9,562
                  )Balance, End of
      Year
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  7,334
                  
                  
                  
                  8,248








NOTE
L


STOCK
OPTION PLAN


In 1997,
the Company adopted a stock option plan for the benefit of directors, officers,
and other key employees.  The number of shares of common stock
reserved for issuance under the stock option plan was 343,850 shares, or ten
percent of the total number of shares of common stock sold in the Company’s
initial public offering of its common stock.





The plan
permits the granting of Stock Appreciation Rights (“SARs”).  SARs
entitle the holder to receive, in the form of cash or stock, the increase in the
fair value of the Company stock from the grant date to the exercise
date.  No SARs have been issued under the plan.





On
October 15, 1997, the Company granted a total of 275,076 options to
directors.  Under the plan, the exercise price of each option cannot
be less than the fair value of the underlying common stock as of the date of the
option grant, and the maximum term is 10 years.  Options vested over a
five year period.  In 2002, the options were fully
vested.





During
2005, the Company adopted SFAS No. 123(R), which replaced SFAS No. 123 and
superseded APB No. 25.  The adoption of this pronouncement had no
impact on the Company’s interim or annual financial position or results of
operations.








2008
Annual Report





Page
54




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
L


STOCK
OPTION PLAN (Continued)


A summary
of the status of the Company’s stock option plan as of December 31, 2008, 2007,
and 2006, and changes during the years ending on those dates is presented
below:





2008
                      
                      2007
                      
                      
                      2006Exercise
                      
                      
                      
                      
                      Exercise
                      
                      
                      
                      
                      
                      ExerciseFixed Options
                      
                      Shares
                      
                      Price
                      
                      Shares
                      
                      
                      Price
                      
                      
                      Shares
                      
                      
                      PriceOutstanding,
      Beginning of Year
                      
                      
                      -
                      
                      
                      
                      
                      216,132
                      
                      
                      
                      
                      
                      
                      216,132
                      
                      
                      $
                      17.18Granted
                      
                      
                      -
                      
                      
                      
                      
                      -
                      
                      
                      
                      
                      
                      
                      -Exercised
                      
                      
                      -
                      
                      
                      
                      
                      30,000
                      
                      
                      $
                      17.18
                      
                      
                      
                      -Forfeited/Expired
                      
                      
                      -
                      
                      
                      
                      
                      186,132
                      
                      
                      
                      
                      
                      
                      
                      -Outstanding,
      End of Year
                      
                      
                      -
                      
                      
                      
                      
                      -
                      
                      
                      
                      
                      
                      
                      
                      216,132
                      
                      
                      $
                      17.18Options Exercisable at
      Year-End
                      
                      
                      -
                      
                      
                      
                      
                      -
                      
                      
                      
                      
                      
                      
                      
                      216,132
                      
                      
                      $
                      17.18






NOTE
M


COMPREHENSIVE
INCOME


Comprehensive
income was comprised of changes in the Company’s unrealized holding gains or
losses on securities available-for-sale during 2008, 2007, and
2006.  The components of comprehensive income and related tax effects
are as follows:





Years Ended December
      31,2008
                      
                      
                      2007
                      
                      
                      2006( In
    Thousands)Gross
      Unrealized Holding (Losses) Gains Arising During the
Period
                      
                      $
                      (1,515
                      )
                      
                      $
                      374
                      
                      
                      $
                      (227
                      )Tax
      Benefit (Expense)
                      
                      
                      515
                      
                      
                      
                      (127
                      )
                      
                      
                      77(1,000
                      )
                      
                      
                      247
                      
                      
                      
                      (150
                      )Reclassification Adjustments for
      Losses (Gains)Included in Net Income
                      
                      
                      1,355
                      
                      
                      
                      (65
                      )
                      
                      
                      44Tax
      (Benefit) Expense
                      
                      
                      (461
                      )
                      
                      
                      22
                      
                      
                      
                      (15
                      )894
                      
                      
                      
                      (43
                      )
                      
                      
                      29Net
      Unrealized Holding (Losses) Gains Arising During the
Period
                      
                      $
                      (106
                      )
                      
                      $
                      204
                      
                      
                      $
                      (121
                      )







2008
Annual Report





Page
55




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
N


REGULATORY
MATTERS


The Bank
is subject to various regulatory capital requirements administered by its
primary federal regulator, the Office of Thrift Supervision
(“OTS”).  Failure to meet the minimum regulatory capital requirements
can initiate certain mandatory, and possible additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the Bank
and its financial statements.  Under the regulatory capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines involving quantitative measures of the
Bank’s assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting practices.  The Bank’s capital amounts and
classification under the prompt corrective action guidelines are also subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors.





Quantitative
measures established by regulation to ensure capital adequacy require the Bank
to maintain minimum amounts and ratios of the following as defined in the
regulations:  total risk-based capital and Tier I capital to
risk-weighted assets, Tier I capital to adjusted total assets, and tangible
capital to adjusted total assets.  As of December 31, 2008, the Bank
met all of the capital requirements to which it is subject and is, therefore,
deemed to be well capitalized.





The
actual and required capital amounts and ratios applicable to the Bank for the
years ended December 31, 2008 and 2007, are presented in the following tables,
including a reconciliation of capital under generally accepted accounting
principles (“GAAP”) to such amounts reported for regulatory
purposes.




Actual
                    
                    
                    Minimum
                    
                    Well
      CapitalizedAmount
                    
                    
                    Ratio
                    
                    
                    Amount
                    
                    
                    Ratio
                    
                    Amount
                    
                    
                    Ratio(In
      Thousands)December 31,
      2008Tangible
      Capital
                    
                    $
                    25,611
                    
                    
                    
                    11.56
                    %
                    
                    $
                    3,324
                    
                    
                    
                    1.50
                    %
                    
                    
                    N/A
                    
                    
                    
                    N/ATier
      1 Capital
                    
                    
                    25,611
                    
                    
                    
                    11.56
                    %
                    
                    
                    6,648
                    
                    
                    
                    3.00
                    %
                    
                    $
                    11,081
                    
                    
                    
                    5.00
                    %Tier
      1 Risk-Based Capital
                    
                    
                    25,611
                    
                    
                    
                    18.06
                    %
                    
                    
                    5,671
                    
                    
                    
                    4.00
                    %
                    
                    
                    8,506
                    
                    
                    
                    6.00
                    %Total
      Risk-Based Capital
                    
                    
                    27,383
                    
                    
                    
                    19.31
                    %
                    
                    
                    11,342
                    
                    
                    
                    8.00
                    %
                    
                    
                    14,177
                    
                    
                    
                    10.00
                    %December 31,
      2007Tangible
      Capital
                    
                    $
                    27,107
                    
                    
                    
                    14.68
                    %
                    
                    $
                    2,770
                    
                    
                    
                    1.50
                    %
                    
                    
                    N/A
                    
                    
                    
                    N/ATier
      1 Capital
                    
                    
                    27,107
                    
                    
                    
                    14.68
                    %
                    
                    
                    5,540
                    
                    
                    
                    3.00
                    %
                    
                    $
                    9,233
                    
                    
                    
                    5.00
                    %Tier
      1 Risk-Based Capital
                    
                    
                    27,107
                    
                    
                    
                    26.06
                    %
                    
                    
                    4,161
                    
                    
                    
                    4.00
                    %
                    
                    
                    6,242
                    
                    
                    
                    6.00
                    %Total
      Risk-Based Capital
                    
                    
                    28,367
                    
                    
                    
                    27.27
                    %
                    
                    
                    8,322
                    
                    
                    
                    8.00
                    %
                    
                    
                    10,403
                    
                    
                    
                    10.00
                    %


2008
Annual Report





Page
56




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
O


FINANCIAL
INSTRUMENTS WITH OFF-BALANCE SHEET RISK


The Bank
is a party to credit related commitments with off-balance sheet risk in the
normal course of business to meet the financing needs of its
customers.  These consist of outstanding mortgage and construction
loan commitments and commercial lines of credit.  Such commitments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the consolidated financial statements.





The
Bank’s exposure to credit loss is represented by the contractual amount of these
commitments.  The Company follows the same credit policies in making
commitments as it does for on-balance sheet instruments.





As of
December 31, 2008 and 2007, outstanding mortgage, construction and commercial
lines of credit commitments were approximately $19,090,000 and $19,959,000,
respectively.





Commitments
to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract.  Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee.  The commitments for lines of credit may
expire without being drawn upon.  Therefore, the total commitment
amounts do not necessarily represent future cash requirements.  The
amount of collateral obtained, if it is deemed necessary by the Bank, is based
on management’s credit evaluation of the customer.





As of
December 31, 2007, the Company held $3.5 million in securities which were
classified as derivatives and were called in 2008.  These securities
were backed by U.S. Government agencies and were included as available-for-sale
securities on the Company’s balance sheet.  The condition that made
these particular securities, known as “range notes”, considered derivatives was
that the payment of interest was dependent upon a specific LIBOR interest rate
falling within a certain range.  If LIBOR exceeded the range, payments
of interest would have been suspended until the certain LIBOR rate returned to
the range.  While the Company held these securities, they remained in
the range for interest to be paid to the bank.  The “range” condition
had no impact on the principal obligation of these notes.





These
derivative securities were not acquired to hedge a specific risk.  The
impact of SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which requires marking these
securities to market value, was not material.





NOTE
P


COMMITMENTS
AND CONTINGENCIES





EMPLOYMENT
CONTRACTS


On
January 7, 2005, the former Chief Executive Officer retired from the
Company.  The Company entered into an early retirement and consulting
agreement with the former Chief Executive Officer.  The agreement
required  the former Chief Executive Officer to provide up to a
maximum of 60 hours of consulting services per month for 36
months.  In addition, the agreement included provisions for a
non-compete period, which expired on January 6, 2006.  The agreement,
which expired on January 6, 2008, stipulated that the Company pay the former
Chief Executive Officer $13,000 per month for 36 months. This agreement was not
renewed.








2008
Annual Report





Page
57




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
P


COMMITMENTS
AND CONTINGENCIES (Continued)





OPERATING
LEASES


During
2003, the Bank entered into a lease with the Company for a branch office
location.  The rental expense associated with this lease is eliminated in
the consolidated statement of operations.  The lease had an initial term of
24 months at a rental rate of $4,025 per month.  The Bank has continued to
lease this property subsequent to the initial lease’s expiration on a
month-to-month basis.  In addition, the Bank leases a branch location from
a third party for $1,650 per month.  The lease, which is renewable, will
expire on April 30, 2009.  The Bank also leases a temporary banking
facility and furnishings which it utilizes at a branch location on land owned by
the Bank.  The lease had an initial term of 12 months at a rental rate
of $2,935 per month.  The Bank has continued to lease the temporary
banking facility and furnishings on a month-to-month basis since the expiration
of its initial term on September 30, 2008.  The Company’s total
contractual obligations under these lease arrangements are $7,000, all of which
are due in 2009.





Total
rent expense incurred by the Bank under these leases amounted to $105,000,
$81,000, and $61,300, for the years ended December 31, 2008, 2007, and 2006,
respectively.





NOTE
Q


CONCENTRATION
OF CREDIT RISK


In
accordance with industry practices, the Company has deposits in other financial
institutions for more than the insured limit.  These deposits in other
institutions do not represent more than the normal industry credit
risk.





NOTE
R


FAIR
VALUE


Effective
January 1, 2008, the Bank adopted SFAS No. 157, Fair Value Measurements,and SFAS No. 159,
The Fair Value Option for
Financial Assets and Liabilities. SFAS No. 157, which was issued in
September 2006, establishes a framework for using fair value. It defines
fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. SFAS No. 159, which was issued in February 2007,
generally permits the measurement of selected eligible financial instruments at
fair value at specified election dates. Upon adoption of SFAS No. 159, the
Bank did not elect to apply the fair value measurement option for any of its
financial instruments.





Under
SFAS 157, a Bank must determine the appropriate level in the fair value
hierarchy for each fair value measurement. To increase consistency and
comparability in fair value measurements, SFAS No. 157 established a fair
value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value into three levels.  It gives the highest priority
to quoted prices (unadjusted) in active markets for identical assets or
liabilities and the lowest priority to unobservable inputs. The level in the
fair value hierarchy within which a fair value measurement falls is determined
based on the lowest level input that is significant to the fair value
measurement in its entirety.  The levels are as follows:




Level 1 – Quoted prices in
active markets for identical assets or liabilities.








2008
Annual Report





Page
58




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)




NOTE
R


FAIR
VALUE (Continued)





Level 2 – Observable inputs
other than quoted prices included in Level 1, such as quoted prices for
similar assets and liabilities in active markets; quoted prices for identical or
similar assets and liabilities in markets that are not active; or other inputs
that are observable or can be corroborated by observable market
data.





Level 3– Unobservable inputs
that are supported by little or no market activity and that are significant to
the fair value of the assets or liabilities. This includes certain pricing
models, discounted cash flow methodologies, and similar techniques that use
significant unobservable inputs.





Fair Value of Assets
Measured on a Recurring Basis





Available-for-Sale
Securities - Estimated fair value of securities is based on quoted market prices
where available. If quoted market prices are not available, estimated fair
valued are based on market prices of comparable instruments. The Bank’s
available-for-sale securities are valued primarily based upon readily observable
market parameters and are classified as Level 2 fair values.





Fair Value of Assets
Measured on a Nonrecurring Basis





Certain
assets and liabilities are measured at fair value on a non-recurring
basis.  In accordance with the provisions of SFAS No. 114, Accounting by Creditors for
Impairment of a Loan, the Bank records loans considered impaired at their
fair value.  A loan is considered impaired if it is probable that the
Bank will be unable to collect all amounts due according to the contractual
terms of the loan agreement. Fair value is measured at the fair value of the
collateral for collateral-dependent loans.  Impaired loans and other
real estate owned are level 2 assets measured using appraisals of the collateral
prepared by external parties less any prior liens.





The
following table summarizes the valuation methodologies used for the Bank’s
financial instruments measured at fair value as well as the general
classification of such instruments pursuant to the valuation
hierarchy.




December
      31, 2008Level
      1
                    
                    
                    Level
      2
                    
                    
                    Level
      3(In
      Thousands)Available for Sale
      Securities:1Mortgage
      Backed Securities
                    
                    $
                    -
                    
                    
                    $
                    26,100
                    
                    
                    $
                    -Collateralized
      Mortgage Obligations
                    
                    
                    -
                    
                    
                    
                    8,039
                    
                    
                    
                    -U.S.
      Government and Agency Obligations
                    
                    
                    -
                    
                    
                    
                    10,070
                    
                    
                    
                    -Mutual
      Funds
                    
                    
                    -
                    
                    
                    
                    3,408
                    
                    
                    
                    -Loans2
                    
                    
                    -
                    
                    
                    
                    2,410
                    
                    
                    
                    -Other Real Estate3
                    
                    
                    -
                    
                    
                    
                    461
                    
                    
                    
                    -
 
 1
              Securities
      are measured at fair value on a recurring basis, generally
      monthly.
 2
              Includes
      impaired loans that have been measured for impairment at the fair value of
      the loan's collateral.
 3
              Other
      real estate is transferred from loans to REO at the lower of cost or
      market.





2008
Annual Report





Page
59




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
  (Continued)





NOTE
R


FAIR
VALUE (Continued)


Changes
to the valuation methodology are reviewed by management to ensure the changes
are appropriate.  As markets and products develop and the pricing for
certain products becomes more transparent, the Bank continues to refine its
valuation methodologies.  The methods described herein may produce a
fair value calculation that may not be indicative of net realizable value or
reflective of future fair values.  Furthermore, while the Bank
believes its valuation methods are appropriate and consistent with other market
participants, the use of different methodologies, or assumptions, to determine
the fair value of certain financial instruments could result in a different
estimate of fair value at the reporting date.  The Bank uses inputs
that are current as of the measurement date, which may include periods of market
dislocation, during which price transparency may be reduced.  The Bank
reviews the classification of its financial instruments within the fair value
hierarchy on an annual basis, which could cause its financial instruments to be
reclassified to a different level.





In
estimating the fair value of financial instruments, the Bank used the following
methods and assumptions:





Cashand Cash
Equivalents


The
carrying amount of cash and due from financial institutions, federal funds sold,
and short-term investments approximate fair values.





Securities


Fair
values for securities, excluding Federal Home Loan Bank Stock, are based on
quoted market prices.  If quoted market prices are not available, fair
values are based on quoted market prices of comparable instruments.





Loans Receivable,
Net


The fair
values of loans are estimated through discounted cash flow analysis, using
current rates at which loans with similar terms would be made to borrowers with
similar credit quality.  Appropriate adjustments are made to reflect
probable credit losses.  The carrying amount of accrued interest on
loans approximated its fair value.





Federal Home Loan Bank
Stock


The
carrying value of Federal Home Loan Bank Stock approximates fair value based on
the redemption provisions of the Federal Home Loan Bank.





Deposit
Liabilities


SFAS No.
107 specifies that the fair value of deposit liabilities with no defined
maturity is the amount payable on demand at the reporting date, i.e., their
carrying or book value. These deposits include interest and non-interest bearing
checking, savings, and money market accounts. The fair value of fixed rate
certificates of deposit is estimated using a discounted cash flow calculation
that applies interest rates currently offered on certificates of similar
remaining maturities to a schedule of aggregate expected cash flows on time
deposits.





Advances from the Federal
Home Loan Bank


The fair
value of fixed rate borrowings is estimated using discounted cash flows, based
on current incremental borrowing rates for similar types of borrowing
arrangements.








2008
Annual Report





Page
60




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)




NOTE
R


FAIR
VALUE (Continued)





Accrued
Interest


The
carrying amount of accrued interest approximates its fair value.





Off-Balance Sheet
Instruments


Off-balance
sheet financial instruments include commitments to extend credit and undisbursed
lines of credit.  The fair value of such instruments is estimated
using fees currently charged for similar arrangements in the marketplace,
adjusted for changes in terms and credit risk as appropriate. The estimated fair
value for these instruments was not significant at


December
31, 2008 and 2007.  The contract or notional amounts of the Company’s
financial instruments with off-balance sheet risk are disclosed in Note
O.





The
estimated fair values of the Bank’s financial instruments are as
follows:





December 31,
      2008
                    
                    
                    December 31,
      2007Carrying
                    
                    
                    Fair
                    
                    
                    Carrying
                    
                    
                    FairValue
                    
                    
                    Value
                    
                    
                    Value
                    
                    
                    Value(In
      Thousands)Financial
      Assets:Cash
      and Cash Equivalents
                    
                    $
                    3,205
                    
                    
                    $
                    3,205
                    
                    
                    $
                    9,462
                    
                    
                    $
                    9,457Securities
      Available-for-Sale
                    
                    
                    47,617
                    
                    
                    
                    47,617
                    
                    
                    
                    47,747
                    
                    
                    
                    47,747Loans,
      Net
                    
                    
                    158,523
                    
                    
                    
                    162,434
                    
                    
                    
                    118,477
                    
                    
                    
                    123,967FHLB
      Stock
                    
                    
                    2,300
                    
                    
                    
                    2,300
                    
                    
                    
                    1,220
                    
                    
                    
                    1,220Accrued
      Interest Receivable
                    
                    
                    1,612
                    
                    
                    
                    1,612
                    
                    
                    
                    1,828
                    
                    
                    
                    1,828Financial
      Liabilities:Deposits
                    
                    $
                    140,115
                    
                    
                    $
                    144,044
                    
                    
                    $
                    129,510
                    
                    
                    $
                    130,320Borrowings
                    
                    
                    52,002
                    
                    
                    
                    54,115
                    
                    
                    
                    26,986
                    
                    
                    
                    27,549Accrued
      Interest Payable
                    
                    
                    164
                    
                    
                    
                    164
                    
                    
                    
                    102
                    
                    
                    
                    102





2008
Annual Report





Page
61




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
S


SELECTED
QUARTERLY FINANCIAL DATA (Unaudited)


The
following sets forth condensed quarterly results of operations for 2008 and
2007:





First
                        
                        
                        Second
                        
                        
                        Third
                        
                        
                        FourthQuarter
                        
                        
                        Quarter
                        
                        
                        Quarter
                        
                        
                        Quarter(Dollars in Thousands, Except Per
      Share Data)2008Interest and Dividend
      Income
                        
                        $
                        2,987
                        
                        
                        $
                        3,019
                        
                        
                        $
                        3,214
                        
                        
                        $
                        3,206Interest
      Expense
                        
                        
                        1,495
                        
                        
                        
                        1,380
                        
                        
                        
                        1,413
                        
                        
                        
                        1,463Net Interest
      Income
                        
                        
                        1,492
                        
                        
                        
                        1,639
                        
                        
                        
                        1,801
                        
                        
                        
                        1,743Provision for Loan
      Losses
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Other Income
      (Loss)
                        
                        
                        115
                        
                        
                        
                        (525
                        )
                        
                        
                        53
                        
                        
                        
                        (637
                        )Other
    Expense
                        
                        
                        1,416
                        
                        
                        
                        1,465
                        
                        
                        
                        1,448
                        
                        
                        
                        1,344Income Tax Expense
      (Benefit)
                        
                        
                        65
                        
                        
                        
                        (119
                        )
                        
                        
                        136
                        
                        
                        
                        (68
                        )Net Income
      (Loss)
                        
                        $
                        126
                        
                        
                        $
                        (232
                        )
                        
                        $
                        270
                        
                        
                        $
                        (170
                        )Net Income (Loss) per Common
      Share1Basic
                        
                        $
                        0.10
                        
                        
                        $
                        (0.18
                        )
                        
                        $
                        0.21
                        
                        
                        $
                        (0.13
                        )Diluted
                        
                        $
                        0.10
                        
                        
                        $
                        (0.18
                        )
                        
                        $
                        0.21
                        
                        
                        $
                        (0.13
                        )Dividends Per
      Share
                        
                        $
                        0.10
                        
                        
                        $
                        0.10
                        
                        
                        $
                        0.10
                        
                        
                        $
                        0.102007Interest and Dividend
      Income
                        
                        $
                        2,654
                        
                        
                        $
                        2,733
                        
                        
                        $
                        2,861
                        
                        
                        $
                        3,000Interest
      Expense
                        
                        
                        1,284
                        
                        
                        
                        1,342
                        
                        
                        
                        1,448
                        
                        
                        
                        1,473Net Interest
      Income
                        
                        
                        1,370
                        
                        
                        
                        1,391
                        
                        
                        
                        1,413
                        
                        
                        
                        1,527Provision (Reversal) for Loan
      Losses
                        
                        
                        -
                        
                        
                        
                        (300
                        )
                        
                        
                        -
                        
                        
                        
                        -Other
Income
                        
                        
                        29
                        
                        
                        
                        43
                        
                        
                        
                        109
                        
                        
                        
                        243Other
    Expense
                        
                        
                        1,276
                        
                        
                        
                        1,314
                        
                        
                        
                        1,441
                        
                        
                        
                        1,378Income Tax
      Expense
                        
                        
                        27
                        
                        
                        
                        127
                        
                        
                        
                        12
                        
                        
                        
                        192Net Income
                        
                        $
                        96
                        
                        
                        $
                        293
                        
                        
                        $
                        69
                        
                        
                        $
                        200Net Income per Common
      Share1Basic
                        
                        $
                        0.08
                        
                        
                        $
                        0.24
                        
                        
                        $
                        0.06
                        
                        
                        $
                        0.16Diluted
                        
                        $
                        0.08
                        
                        
                        $
                        0.24
                        
                        
                        $
                        0.06
                        
                        
                        $
                        0.16Dividends Per
      Share
                        
                        $
                        0.10
                        
                        
                        $
                        0.10
                        
                        
                        $
                        0.10
                        
                        
                        $
                        0.101Quarterly per share amounts do not
      add to total for the year ended due to rounding.





2008
Annual Report





Page
62




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
T


EARNINGS (LOSS) PER COMMON
SHARE


Earnings
(loss) per share are computed using the weighted average number of shares
outstanding as prescribed in SFAS No. 128.  Options to purchase
216,132 shares at $17.18 per share were outstanding through October 15, 2007 and
during the year ended December 31, 2006.  The options were included in
the computation of diluted earnings per share for the years ended December 31,
2008, 2007, and 2006.  The Company had no other securities outstanding
during the years ended December 31, 2008, 2007, and 2006 that would have a
dilutive effect on earnings (loss) per share.




Years
      Ended December 31,(Dollars
      in Thousands, Except Per Share Data)
                          
                          2008
                          
                          
                          2007
                          
                          
                          2006Numerator:Net
      (Loss) Income
                          
                          $
                          (6
                          )
                          
                          $
                          658
                          
                          
                          $
                          2,114Effect
      of Dilutive Securities
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Numerator
      for Diluted (Loss) Earnings Per Share
                          
                          $
                          (6
                          )
                          
                          $
                          658
                          
                          
                          $
                          2,114DenominatorWeighted-Average
      Shares Outstanding
                          
                          
                          1,278,292
                          
                          
                          
                          1,243,655
                          
                          
                          
                          1,212,174Effect
      of Potentially Dilutive Securities and Contingently Issuable
      Shares
                          
                          
                          -
                          
                          
                          
                          25,340
                          
                          
                          
                          10,776Denominator
      for Diluted Earnings Per Share
                          
                          
                          1,278,292
                          
                          
                          
                          1,268,995
                          
                          
                          
                          1,222,950Earnings
      (Loss) Per ShareBasic
                          
                          $
                          -
                          
                          
                          $
                          0.53
                          
                          
                          $
                          1.74Diluted
                          
                          $
                          -
                          
                          
                          $
                          0.52
                          
                          
                          $
                          1.73Cash
      Dividends Per Share
                          
                          $
                          0.40
                          
                          
                          $
                          0.40
                          
                          
                          $
                          0.40





The
following table presents the components of average outstanding shares for each
of the three years:





Years Ended
      December 31,2008
                  
                  
                  2007
                  
                  
                  2006Average
      Common Shares Issued
                  
                  
                  3,438,500
                  
                  
                  
                  3,438,500
                  
                  
                  
                  3,438,500Average
      Treasury Shares
                  
                  
                  (2,152,700
                  )
                  
                  
                  (2,165,821
                  )
                  
                  
                  (2,162,860
                  )Average
      Unearned ESOP Shares
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (23,856
                  )Average
      Unearned RRP Trust Shares
                  
                  
                  (7,508
                  )
                  
                  
                  (29,024
                  )
                  
                  
                  (39,610
                  )1,278,292
                  
                  
                  
                  1,243,655
                  
                  
                  
                  1,212,174







2008
Annual Report





Page
63




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
U


CONDENSED
FINANCIAL INFORMATION - PARENT COMPANY ONLY


Financial
information pertaining only to GS Financial Corp. is as follows:





CONDENSED BALANCE
      SHEETSDecember31,2008
                    
                    
                    2007(In
    Thousands)ASSETSCash and Cash
      Equivalents
                    
                    $
                    1,736
                    
                    
                    $
                    755Investments - Available-for-Sale,
      at Fair Value
                    
                    
                    46
                    
                    
                    
                    78Investment in
      Subsidiary
                    
                    
                    25,391
                    
                    
                    
                    26,959Other
Assets
                    
                    
                    662
                    
                    
                    
                    691Total
Assets
                    
                    $
                    27,835
                    
                    
                    $
                    28,483LIABILITIESANDSTOCKHOLDERS'
      EQUITYOther
      Liabilities
                    
                    $
                    101
                    
                    
                    $
                    141Shareholders’
      Equity
                    
                    
                    27,734
                    
                    
                    
                    28,342Total Liabilities and
      Stockholders' Equity
                    
                    $
                    27,835
                    
                    
                    $
                    28,483








CONDENSED STATEMENTS OF
      INCOMEYears Ended
      December 31,2008
                      
                      
                      2007
                      
                      
                      2006(
      In Thousands)Income:Dividends from Guaranty Savings
      Bank
                      
                      $
                      1,600
                      
                      
                      $
                      500
                      
                      
                      $
                      -Interest
    Income
                      
                      
                      14
                      
                      
                      
                      23
                      
                      
                      
                      53Other
Income
                      
                      
                      92
                      
                      
                      
                      100
                      
                      
                      
                      96Total
Income
                      
                      
                      1,706
                      
                      
                      
                      623
                      
                      
                      
                      149Operating
      Expenses
                      
                      
                      277
                      
                      
                      
                      306
                      
                      
                      
                      321Income (Loss) Before Income Taxes
      and Equity in Undistributed Earnings (Loss) of Guaranty Savings
      Bank
                      
                      
                      1,429
                      
                      
                      
                      317
                      
                      
                      
                      (172
                      )Applicable Income Tax
      Benefit
                      
                      
                      (42
                      )
                      
                      
                      (76
                      )
                      
                      
                      (58
                      )Equity in Undistributed (Loss)
      Earnings of Guaranty Savings Bank
                      
                      
                      (1,477
                      )
                      
                      
                      265
                      
                      
                      
                      2,228Net (Loss)
      Income
                      
                      $
                      (6
                      )
                      
                      $
                      658
                      
                      
                      $
                      2,114








2008
Annual Report


Page
64




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
U


CONDENSED
FINANCIAL INFORMATION - PARENT COMPANY ONLY (Continued)





CONDENSED STATEMENTS OFCASHFLOWSYears Ended December
      31,2008
                          
                          
                          2007
                          
                          
                          2006(
      In Thousands)OPERATING
      ACTIVITIESNet (Loss)
      Income
                          
                          $
                          (6
                          )
                          
                          $
                          658
                          
                          
                          $
                          2,114Adjustments to Reconcile Net
      (Loss) Income to Net Cash Provided by Operating
      ActivitiesDepreciation
      Expense
                          
                          
                          14
                          
                          
                          
                          14
                          
                          
                          
                          16Loss onSaleof
    Investments
                          
                          
                          12
                          
                          
                          
                          -
                          
                          
                          
                          4Equity in Undistributed (Loss)
      Earnings of Subsidiary
                          
                          
                          1,477
                          
                          
                          
                          (265
                          )
                          
                          
                          (2,228
                          )Amortization of Investment
      Premium
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2Decrease (Increase) in Other
      Assets
                          
                          
                          84
                          
                          
                          
                          124
                          
                          
                          
                          (10
                          )Change in Deferred Income Tax
      Assets/Liabilities
                          
                          
                          (41
                          )
                          
                          
                          (31
                          )
                          
                          
                          (42
                          )(Decrease) Increase in Other
      Liabilities
                          
                          
                          (74
                          )
                          
                          
                          (448
                          )
                          
                          
                          321Net Cash Provided by Operating
      Activities
                          
                          
                          1,466
                          
                          
                          
                          52
                          
                          
                          
                          177INVESTING
      ACTIVITIESRedemption (Investment) in Mutual
      Funds
                          
                          
                          23
                          
                          
                          
                          -
                          
                          
                          
                          442Principal Paydowns Notes
      Receivable GS Financial ESOP
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          334Proceeds from Maturites of
      Investment Securities
                          
                          
                          1
                          
                          
                          
                          29
                          
                          
                          
                          22Net Cash Provided by Investing
      Activities
                          
                          
                          24
                          
                          
                          
                          29
                          
                          
                          
                          798FINANCING
      ACTIVITIESPurchases of Treasury
      Stock
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (300
                          )Proceeds from Stock Option
      Exercise
                          
                          
                          -
                          
                          
                          
                          516
                          
                          
                          
                          -Payment of
      Dividends
                          
                          
                          (509
                          )
                          
                          
                          (503
                          )
                          
                          
                          (486
                          )Net Cash (Used in) Provided by
      Financing Activities
                          
                          
                          (509
                          )
                          
                          
                          13
                          
                          
                          
                          (786
                          )INCREASE INCASHANDCASHEQUIVALENTS
                          
                          
                          981
                          
                          
                          
                          94
                          
                          
                          
                          189CASHANDCASHEQUIVALENTS, BEGINNING OF
      YEAR
                          
                          
                          755
                          
                          
                          
                          661
                          
                          
                          
                          472CASHANDCASHEQUIVALENTS, END OF
      YEAR
                          
                          $
                          1,736
                          
                          
                          $
                          755
                          
                          
                          $
                          661







2008
Annual Report


Page
65




Board of
      Directors








Albert
J. Zahn, Jr.


Mr. Zahn
(age 57) has served as Chairman of
the Board of GS Financial andGuaranty Savings Bank since April 2005.Mr.Zahnis a certifiedpublic accountant and President of the
firm Al Zahn CPA, aProfessionalAccountingCorporation inMandeville,Louisiana.He has been a director since1992.





Edward
J. Bourgeois


Mr.
Bourgeois (age 52) is a certified
public accountant in the State ofLouisiana and currently serves as
President and Chief ExecutiveOfficer of Centergy Consulting, LLC, New
Orleans, Louisiana, aconsulting firm specializing in the
banking and financial industry.Mr.Bourgeoisalso serves as the President and Chief
ExecutiveOfficer of My EZ Car Care LLC, an
automotive services limitedliability company.Mr.Bourgeoiswas formerly the Executive
VicePresident/Chief Operating Officer of
Crescent Bank and Trust,NewOrleans,Louisianafrom 2001 to 2004. He is a member of
theAmerican Institute of Certified Public
Accountants and LouisianaSociety of Certified Public Accountants
and Board member of theNational Automotive Finance
Association.He
has been a director since 2004.





Stephen
L. Cory


Mr. Cory
(age 59) is an insurance agent and
President of Cory, Tucker &Larrowe, Inc. inMetairie,Louisiana. He has been a director
since 1995.





Bradford
A. Glazer


Mr.
Glazer (age 53) is President of
Glazer Enterprises, Inc., a transportationagency representing Cincy Limos,M.H.Timmer, LLC, and ParkTransport, Inc. Cincy Limos is a
limousine service serving greaterCincinnati.M.H.Timmeris a freight agency representing
theLandstar Carrier Group, which is a
global transportation provider.Park Transport is a 48 state full
truckload freight broker.Mr.Glazeralso serves as the President of Park
Transport.GlazerEnterprises, located inCincinnati,Ohio, is also a real
estate


management and development
company.He has been
a director since 1991.





Bruce
A. Scott


Mr. Scott
(age 56) is an attorney and has
served as Executive Vice Presidentof GS Financial since its formation in
February 1997 and ExecutiveVice President of Guaranty Savings Bank
since 1985.Mr.Scotthasserved as Vice Chairman of the Board
since 1990.Mr.Scottalsoserves as legal counsel of Guaranty
Savings Bank.He has
been a director since 1982.





Hayden
W. Wren III


Mr. Wren
(age 60) is the Director of
Commercial/Investment Brokerage ofCorporate Realty, Inc.,New Orleans,Louisiana.Mr.Wrenis aCertified Commercial Investment Member
(“CCIM”), a member ofthe Society of Industrial and Office
Realtors (“SIOR”), and a licensedcertified public accountant having
membership affiliations with theAmerican Institute of Certified Public
Accountants and theLouisiana Society of Certified Public
Accountants.He has been a director since2003.








Executive Officers Who Are Not
      Directors





Stephen
E. Wessel


Mr.
Wessel (age 46) has served as
President and Chief Executive Officer of GS Financialand Guaranty Savings Bank since December
2005. Since December 2007, hehas served as a Director of Guaranty
Savings Bank. Previously he served asSenior Vice President/South Louisiana
Business Banking Manager for AmSouthBank, a regional commercial bank,New Orleans,Louisianasince August 2001.Prior thereto,Mr.Wesselserved as Vice President/Regional
Business BankingManager for Whitney National Bank,New Orleans,Louisianafrom December


1991 to August 2001.





Lettie
R. Moll


Ms. Moll
(age 55) has served as Vice President and Corporate Secretary of GS Financial
since its formation in 1997 and Vice President and Corporate Secretary of
Guaranty Savings since March 1987 and March 1982, respectively. Ms. Moll
currently serves as Guaranty Savings Bank's Branch Administrator and manages the
deposit products.





Stephen
F. Theriot


Mr.
Theriot (age 35) has served as Senior Vice President and Chief Financial Officer
of GS Financial and Guaranty Savings since December 2008. Prior thereto, Mr.
Theriot served as the Vice President and Chief Operating Officer of Guaranty
Savings Bank since February 2007 and assumed the additional duties of principal
financial officer of GS Financial and Guaranty Savings Bank in September 2008.
Mr. Theriot previously served as Controller of Mutual Savings and Loan
Association, in Metairie, Louisiana. Prior thereto, Mr. Theriot served as a
Senior Auditor in the Audit and Assurance Business Services Department of Ernst
& Young LLP.








2008
Annual Report





Page
66




Banking
      Locations




Main
Office


3798
Veterans Memorial Blvd.


Metairie,
LA   70002


(504)
457-6220





West
Bank Branch


1800
Manhattan Blvd.


Harvey,
LA    70058


(504)
361-3391





Mid
City Branch


3915
Canal Street


New
Orleans, LA  70119


(504)
483-7146




Mandeville
Branch


2111 N.
Causeway Blvd


Mandeville,
LA  70471


(985)
626-6229





Ponchatoula
Branch


1515 Hwy
51 South


Ponchatoula,
LA  70454


(985)
370-7051





Mortgage
Production Office


1700
Veterans Memorial Blvd.


Metairie,
LA  70002


(504)
828-4327







2008
Annual Report




Page
67